AUD/USD keeps the red below 0.7500 mark, moves little post-US data

• AUD/USD witnessed an intraday turnaround from multi-month tops touched earlier this Thursday.
• The risk-off impulse, elevated US bond yields revived the USD demand and exerted some pressure.
• The lack of follow-through selling warrants some caution before positioning for any corrective slide.

The AUD/USD pair remained on the defensive through the early North American session, albeit has managed to rebound from pips from daily swing lows. The pair was last seen trading just below the key 0.7500 psychological mark, down over 0.25% for the day.

The pair struggled to capitalize on its early positive move to the highest level since early July and witnessed an intraday turnaround from the 0.7535 area. The corrective pullback was sponsored by a goodish pickup in demand for the US dollar, which drew some support from the risk-off impulse and elevated US Treasury bond yields.

Investors turned nervous amid renewed worries about potential contagion from China Evergrande's debt crisis. The heavily indebted developer said on Wednesday that a $2.6 billion stake in its property services unit failed. This, in turn, tempered investors' appetite for perceived riskier assets and benefitted the safe-haven USD.

Meanwhile, the yield on the benchmark 10-year US government bond held steady near the 1.67% mark, or the highest level since May and extended additional support to the greenback. Investors seem convinced that a faster than expected rise in inflation might force the Fed to adopt a more aggressive policy response in 2022.

On the economic data front, the US Weekly Initial Jobless Claims dropped to 290K during the week ended October 15 as against expectations for a modest rise to 300K from 296K previous. This, to a larger extent, helped offset a weaker than anticipated Philly Fed Manufacturing Index, which fell to 23.8 for the current month from 30.7 in September.

The USD bulls seemed rather unaffected by mixed economic data, instead took cues from an extension of the recent rally in the US bond yields. In fact, the yield on the yield on the benchmark 10-year US government bond held steady near the 1.67% mark, or the highest level since May amid expectations for an early policy tightening by the Fed.

This week's dismal US macro releases – Industrial Production and housing market data – pointed to weakening economic activity. Investors, however, seem convinced that a faster than expected rise in inflation might force the Fed to adopt a more aggressive policy response and have been pricing in the possibility of a rate hike in 2022.

It will now be interesting if the AUD/USD pair can attract fresh buying at lower levels or the pullback suggests that the recent strong positive move witnessed from September swing lows has run out of steam. Nevertheless, the lack of any strong follow-through selling warrants some caution before confirming that the pair has topped out.

Technical levels to watch