AUD/USD teases sellers around 0.7200 on mixed concerns ahead of RBA, US inflation
- AUD/USD extends pullback from six-week top amid cautious optimism.
- Traders brace for RBA’s second rate hike of 2022, worth 0.25%, amid firmer Aussie jobs report, GDP data.
- China-linked headlines, data join increasing hawkish Fed bets to challenge traders.
- Off in New Zealand, Switzerland and Germany limit the market’s performance amid a light calendar.
AUD/USD holds lower ground near 0.7200, down for the second consecutive day after reversing from a six-week high, as market sentiment dwindles ahead of the key Reserve Bank of Australia (RBA) monetary policy verdict. Also challenging the Aussie pair buyers is the cautious mood ahead of this week’s US Consumer Price Index (CPI) for May.
A partial holiday in Australia joins the gradually improving Caixin Services PMI data for May from China to restrict immediate AUD/USD downside. That said, China’s Caixin Services PMI for May drops below 47.3 forecasts to 41.4, versus 36.2 prior. In doing so, the private services activity gauge marked a lesser reading for the fifth time while staying below the 50.00 neutral level, suggesting a contraction in activities.
Earlier in the day, Australia’s TD Securities Inflation for May, up from -0.1% to 1.1% MoM, tried to defend buyers but failed amid the market’s indecision ahead of the key US CPI and the RBA interest rate decision.
It’s worth observing that the recent positive Aussie data underpin expectations of a 0.25% rate hike for tomorrow, as well as clues for more such actions. Hence, any disappointment won’t be taken lightly as the odds favoring the Fed’s 0.50% rate hike in September recently jumped to 75% versus 35% a week ago.
Elsewhere, China’s reduction in covid-led activity restrictions and the US signals to please China will ease the Trump-era tariffs could help the AUD/USD to stay afloat, despite failing to post major gains.
To sum up, AUD/USD bears remain hopeful ahead of tomorrow’s RBA verdict.
Technical analysis
A pullback from the 200-DMA surrounding 0.7260 joins a clear downside break of a three-week-old ascending support line, now resistance around 0.7240, to favor AUD/USD bears targeting the 20-DMA support surrounding 0.7080.