AUD/USD bulls pause around 0.7350 with eyes on RBA Minutes, Governor Lowe

• AUD/USD retreats after two-day run-up from monthly low.
• China data, hopes from Sino-American talks underpin bullish bias despite firmer DXY.
• Yields remain strong ahead of US Retail Sales, ignore Fedspeak to tame rate hike calls.
• RBA Minutes, Governor Lowe’s speech eyed for rate hike clues, US data will be important too.

AUD/USD fades a two-day rebound from a monthly low, pressured around 0.7345 at the start of Tuesday’s Asian session. The Aussie pair overcame firmer US Dollar Index (DXY) and Treasury yields to mark a positive week-start before easing from 0.7371 ahead of the Reserve Bank of Australia’s (RBA) latest monetary policy meeting minutes and a speech from Governor Philip Lowe.

A surprisingly strong China Retail Sales and Industrial Production data for October joined the People’s Bank of China’s (PBOC) liquidity injection to offer a positive start to the AUD/USD prices. China Retail Sales rose past 3.5% market forecast and 4.4% prior to 4.9% YoY whereas Industrial Production (IP) jumped to 3.5% versus 3.0% expected and 3.1% prior release. Further, the People’s Bank of China (PBOC) injected CNY1 trillion via one-year medium-term lending (MLF).

Also positive for the AUD/USD prices was optimism surrounding the US-China talks and US stimulus. US President Joe Biden and his Chinese counterpart Xi Jinping are up for a virtual meeting after multiple months of silence among the world’s top two economies.

It’s worth noting that US President Joe Biden formally signed his $1.0 trillion bi-partisan infrastructure bill and recently challenged the pair sellers. On the same line were the latest Fedspeak that tried to tame the rate hike talks and reflation fears. Recently, Richmond Federal Reserve Bank President Thomas Barkin said, “If ‘need is there’ fed will act to curb inflation, but good to have a few more months ‘to see where reality is.’”

Amid these plays, the US 10-year Treasury yields jumped to a fresh three-week high, underpinning the US Dollar Index rally to renew the yearly top. However, the Wall Street benchmarks traded mixed.

Looking forward, AUD/USD traders will pay close attention to the latest RBA Minute, followed by comments from RBA Governor Lowe, for clear direction after the downbeat Aussie jobs report preceded the recent unlocks. Should the policymakers sound optimistic, the RBA rate hike chatters will renew, which in turn can add to the pair’s latest rebound. Also important will be the US Retail Sales for October, expected to keep 0.7% MoM growth.

Read: US Retail Sales October Preview: Inflation Is the key, not Retail Sales

Technical analysis

A convergence of 100-DMA and 50-DMA, around 0.7360-65 restricts the AUD/USD pair’s bounce off the 61.8% Fibonacci retracement (Fibo.) level of the August-October uptrend, near 0.7275. Hence, a decisive break of the stated levels becomes necessary for a clear direction. Bearish MACD and steady RSI line suggest the sellers are having an upper hand.