AUDUSD retreats towards 0.6750 on geopolitical fears, focus on Aussie Wage Price Index, US Retail Sales

• AUDUSD prints mild losses at the highest levels in two months.
• NATO Ambassadors to hold emergency meeting as Russian missile struck Poland.
• Upbeat sentiment favored AUDUSD buyers despite softer data from US, China and Australia.
• Firmer Aussie wage numbers can renew buying but risk-aversion, US data are more important to watch for clear directions.

AUDUSD grinds lower around 0.6750, after refreshing a two-month high, as risk-off mood joins pre-data anxiety to challenge buyers during early Wednesday in Asia.

The Aussie pair’s latest weakness could be linked to the headlines surrounding Russia’s missiles that struck Poland, a North Atlantic Treaty Organization (NATO) nation. Following that hit, the global leaders criticized Moscow’s attempt while the NATO ambassadors called for an emergency meeting even if Russia's Defense Ministry denied claims of Moscow’s strike on Poland.

Just after the news broke Wall Street pared initial gains and the US Treasury yields rebounded from the intraday low. That said, the S&P 500 Futures print mild losses by the press time.

The risk-off mood underpins the US Dollar’s safe-haven demand and weighs on the AUDUSD prices, mainly due to the pair’s risk barometer status.

On Tuesday, the Reserve Bank of Australia’s (RBA) openness for all moves joined the absence of major negatives from the Group of 20 Nations (G20) meeting in Indonesia to favor the AUDUSD prices initially. On the same line was China’s readiness for more stimulus and the softer US Producer Price Index (PPI) for October and the Federal Reserve Bank of New York's Empire State Manufacturing Index for the said month.

Given the latest risk aversion, as well as the pre-data caution, the AUDUSD pair is likely to remain pressured ahead of Australia’s Wage Price Index for the third quarter (Q3), expected 0.9% QoQ versus 0.7% prior. That said, an improvement in the wages could help the RBA to turn down the dovish expectations, which in turn may help the Aussie pair to consolidate the latest losses. However, US Retail Sales for October, expected 1.0% versus 0.0% prior, will be more important considering the growing chatters of the Federal Reserve’s (Fed) pivot.

It should be noted that the latest statements from the International Monetary Fund (IMF) challenges the AUDUSD bears and keeps buyers hopeful ahead of the key Aussie data. “Australia should keep tightening monetary and fiscal policy to help cool domestic demand and keep inflation expectations in check, the IMF said,” reported Bloomberg.

Also read: US October Retail Sales Preview: US Dollar unlikely to find reprieve

Technical analysis

Despite the latest pullback, the AUDUSD pair defends the previous day’s upside break of the 100-DMA, around 0.6700 by the press time, which in turn keeps the buyers hopeful of visiting September’s high near 0.6920.