AUD/USD struggles around mid-0.6700s amid market’s anxiety as US inflation looms

AUD/USD seesaws around 0.6760 while fading the late Tuesday’s corrective bounce off 0.6745 around the monthly high, following the first daily loss in seven. In doing so, the Aussie pair portrays the market’s anxiety ahead of the all-important US Consumer Price Index (CPI) data for April. Also keeping traders on their toes is a dramatic start of the US debt-ceiling talks and fears of tighter credit conditions in the US banks.

It’s worth noting that the downbeat statistics from Australia and China joined hawkish comments from the Federal Reserve (Fed) officials, as well as the risk-off mood, to supersede the Pacific major’s upbeat annual budget and weigh on the AUD/USD prices the previous day.

Australia’s first quarter (Q1) Retail Sales shrank 0.6% versus -0.4% market forecasts and -0.2% prior readings. Further, China’s headlines Trade Balance rose to $90.21B in April versus $71.6B expected and $88.19B prior while the CNY figures eased to 618.44B compared to 637.16B market forecasts and 601.01B prior. It’s worth noting, however, that the Exports and Imports declined in the said month on both the USD and Chinese Yuan (CNY) terms.

On the other hand, the US NFIB Small Business Optimism index dropped to the lowest level since 2013, to 89 in April. Following the data, Federal Reserve Bank of New York President John Williams said, per Reuters, "Fed has not said it's done raising rates."

Elsewhere, the Australian government forecasts a 2022/23 budget surplus of A$4.2 billion, 0.2% of GDP, making it the first balanced budget in many years.

Talking about the risks, International Monetary Fund (IMF) Chief Economist Pierre-Olivier Gourinchas said on Tuesday, “We are a bit concerned about recent banking sector turbulence.” The same could be heard from the Fed's quarterly survey of bank loan officers, released on Monday.

Recently, US Senate Majority Leader Chuck Schumer conveyed the absence of progress in the key debt-ceiling talks at the White House.

Against this backdrop, Wall Street closed with mild losses whereas the US Treasury bond yields remained firmer by the end of Tuesday’s North American session.

Looking ahead, Australia’s Westpac Consumer Confidence for May, expected to drop to -1.7% versus 9.4% prior, can offer immediate directions but major attention will be given to the US CPI for April, expected to print a minor MoM increase in the headline CPI and a softening in the Core CPI.

Also read: US April CPI Preview: How will inflation data influence Fed rate outlook?

Technical analysis

Failure to cross the 100-DMA hurdle, around 0.6790 by the press time, keeps AUD/USD bears hopeful.