AUD/USD stays mildly bid above 0.6300 as traders await Australia budget, inflation

• AUD/USD fades early Asian session gains amid sluggish markets.
• Cautious mood ahead of the key data/events challenges buyers.
• DXY remains pressured amid downbeat yields, doubts over China exert downside pressure on prices.
• Aussie budget needs to ignore downbeat forecast to defend buyers, US Q3 GDP is also important for fresh impulse.

AUD/USD portrays the pre-event anxiety as it retreats from the intraday high to 0.6320 heading into Tuesday’s European session. The Aussie pair initially cheers softer US dollar but has been easing of late as traders await the first budget from Australia's Labour government.

"The immediate focus is on the Australian budget where strong commodity prices have cut estimates for the FY2023 deficit in half to A$36.9 billion, a fiscally positive backdrop for the Aussie dollar," said analysts at ANZ in their latest report. “Australia's Labor government will unveil its first budget on Tuesday as economic growth slows both at home and abroad, emphasizing its spending will focus on easing the cost-of-living crisis without lighting a fire under the already high inflation,” stated Reuters previously.

Elsewhere, mixed concerns surrounding China’s efforts to defend the struggling economy and global pessimism over Xi Jinping's third term, not to forget Hang Seng’s slump to a 13-year low, also exert downside pressure on the risk barometer pair.

It should be noted that the sluggish US dollar and a lack of major data/events challenge bears. That said, the US Dollar Index (DXY) remains on the back foot around 111.85, taking rounds to intraday low while struggling to extend the week-start gains amid downbeat Treasury bond yields and cautious optimism in the markets.

While portraying the mood, the US 10-year Treasury yields remain pressured around 4.21%, down two basis points (bps) while the US stock futures and stocks in the Asia-Pacific region are mildly bid.

Looking forward, the Aussie budget and Wednesday’s inflation data can entertain AUD/USD traders ahead of Thursday’s US Gross Domestic Product for the third quarter (Q3). While expectations of stimulus from Australia contrast with the recently softer tone from the Reserve Bank of Australia (RBA) to keep bears hopeful, US GDP should remain firmer to keep recall sellers.

Technical analysis

Although the 21-DMA challenges AUD/USD buyers around 0.6365, a convergence of the weekly support line and the previous resistance line from September 13, around 0.6260, appears a tough nut to crack for the bears to retake control.