AUD/USD struggles to defend 0.7700, RBA minutes, full markets eyed

• AUD/USD hangs in balance around 0.7700 after a negative week.
• Off in Australia, China and a light calendar elsewhere joined pre-Fed caution to offer dull markets.
• New York Fed Inflation Expectations portray strong price pressure, St. Louis Fed’s gauge off two-month low.
• Full markets, RBA minutes will battle tense conditions, gold prices should be tracked as well.

AUD/USD seesaws around 0.7710-15, following a sluggish daily performance, at the start of Tuesday’s Asian session. The Aussie pair struggled to find the direction the previous day amid an off in the key markets and mixed sentiment ahead of Wednesday’s Federal Open Market Committee (FOMC), not to forget a light calendar. However, the returns of full markets and RBA minutes, followed by the US Retail Sales, could offer an interesting Tuesday.

Bears stay hopeful on Inflation jitters, gold’s drop…

Despite posting a dormant day, AUD/USD sellers don’t give up controls amid early signals of peaking inflation in the US and doubts over macros elsewhere, coupled with gold’s drop. The same creates confusion in the markets and puts a safe-haven bid under the US dollar. That said, the US dollar index (DXY) edges higher around the weekly top teased on Friday.

US data has been fuelling reflation fears and more fiscal aides are in the pipeline. However, the Federal Reserve (Fed) policymakers consider these challenges as short-term and battle tapering woes.

Of late, initial signals of the US inflation expectations portray the escalating price pressure and keep traders on the edge ahead of the key Fed meeting. Recently, New York Fed’s one-year inflation expectations jumped to a record high whereas the same for three years rose to an eight-year peak. On the other hand, St. Louis Fed’s inflation indicator for 10-years took a U-turn from a two-month low flashed on Friday.

Read: Federal Reserve Preview: First up, then down? Playbook for trading the Fed

In addition to the inflation worries, chatters surrounding the Group of Seven (G7) members push for covid origin inquiry and dislike for China’s performance in Xinjiang and Hong Kong also weigh on the mood. Furthermore, fears of Delta variant of the covid and challenges for the RBA, as portrayed by Bob Gregory, a veteran economist who once sat on the Reserve Bank’s board. The economist recently said, per Bloomberg, “The tension between what’s best in the short run and what’s best in the long run hasn’t ever been as sharp as it is now.”

Amid these plays, US 10-year Treasury yields rose 3.5 basis points to 1.49% whereas Wall Street benchmarks closed mixed.

Given the struggling times and a cautious week, AUD/USD traders may prefer staying inside the immediate trading range. However, today’s RBA minutes and return of the Aussie traders from the long weekend could offer intermediate moves, mostly downside, ahead of the US session report of Retail Sales for May, expected -0.8% versus +0.0% prior.

Read: US May Retail Sales Preview: Analyzing major pairs' reaction to previous releases

Technical analysis

AUD/USD seesaws between 100-day SMA and a seven-month-old support line with gradually firming bearish bias. Hence, sellers aim for a clear downside break of 0.7690 trend line support to aim for another support line, near 0.7655. It should, however, be noted that an upside break of 100-day SMA, around 0.7730, should aim for the 0.7800 threshold.