AUD/USD recovery eyes 0.6550 on mild appreciation to US debt ceiling deal, focus on Aussie inflation, US NFP

AUD/USD picks up bids to extend the previous day’s rebound from the yearly low, mildly bid near 0.6530 by the press time, as it justifies the market’s cautious optimism amid holidays in multiple bourses on Monday.

That said, the hopes of avoiding the catastrophic US default recently put a floor under the risk-barometer AUD/USD pair. Adding strength to the pair’s consolidation of monthly losses are the hopes of witnessing upbeat Aussie inflation data from Australia and optimism about the Reserve Bank of Australia’s (RBA) rate hikes, considering the recently firmer Aussie data and the Reserve Bank of New Zealand’s (RBNZ) rate lift.

On Saturday, US President Joe Biden and House Speaker Kevin McCarthy reached a tentative deal to raise the Federal government's $31.4 trillion debt ceiling through January 2025. However, the agreement lacks support from some of the leftists and rightists due to the compromises involved. That said, the debt ceiling deal needs to pass through the House on Wednesday and the Senate by June 05 to avoid the looming ‘catastrophic’ default.

Also read: US President Biden: This deal is good news for the American people

Apart from the US debt ceiling optimism, improving China Industrial Profits for April also underpin the AUD/USD pair’s rebound due to Canberra’s business ties with Beijing. That said, China's National Bureau of Statistics (NBS) said during the weekend that China’s Industrial Firms Profits improved to -18.2% YoY versus -19.2% prior. It should be noted that the Year-To-Date (YTD) figures suggest -20.6% numbers versus -21.4% previous readings.

Even so, comparatively stronger US data and hawkish Fed bets challenge the Aussie pair buyers ahead of the top-tier US and Australia economics.

On Friday, US Durable Goods Orders for April came in better-than-forecast to 1.1% from 3.3% prior, versus -1.0% expected. Further, Nondefense Capital Goods Orders ex Aircraft, also known as the Core Durable Goods Orders, marked upbeat growth of 1.4% compared to -0.2% anticipated and -0.6% previous readings. Additionally, the Core PCE Price Index for the said month rose past market forecasts and previous readings of 0.3% MoM and 4.6% YoY to 0.4% and 4.7% in that order.

Following the data, International Monetary Fund Managing (IMF) Director Kristalina Georgieva and Federal Reserve Bank of Chicago President Austan Goolsbee appear hawkish for the Fed. Though, Cleveland Fed President Loretta Mester said that the Personal Consumption Expenditures (PCE) Price Index released on Friday underscored the slow progress on inflation. 

Amid these plays, the market sentiment remains mildly positive and helps the AUD/USD to grind higher. With this, Wall Street closed on a positive note while S&P500 Futures print mild gains as it cheers the US debt ceiling deal whereas the holidays in major bourses restrict the bond market moves of late.

Looking ahead, Australia’s Monthly Consumer Price Index and the US Nonfarm Payrolls (NFP) may entertain AUD/USD bulls but major attention will be given to the US Congress voting on the debt ceiling deal.

Technical analysis

AUD/USD recovery remains elusive unless crossing the previous support stretched from March, around 0.6580 by the press time.