AUD/USD bounces off three-month low amid pre-Fed, RBA anxiety, US PMI eyed too

• AUD/USD seesaws around the lowest levels since February, recently off daily low.
• Risk profile remains weak as traders brace for the key week.
• Aussie PMIs came in better but China-linked woes, headlines from Russia weigh on prices.
• RBA hawks have less ammunition than Fed bulls, suggesting pair’s further downside despite anticipated rate hikes.

AUD/USD pares intraday losses around the lowest levels since February during the initial hour of Monday’s European session. In doing so, the Aussie pair licks its wounds amid a three-day downtrend near 0.7060 by the press time.

The Aussie pair’s latest rebound could be linked to the US dollar’s pullback from the intraday high as European traders jump on their desks The US Dollar Index (DXY) retreat diverts from the firmer US Treasury yields as the 10-year benchmark rises 5.7 basis points (bps) to 2.942% at the latest.

It’s worth noting, however, that the market sentiment remains sour as Eurostoxx 50 and DAX print losses by the press time.

Downbeat German Retail Sales back the fears of economic weakness in the bloc due to the Russia-Ukraine crisis. The same geopolitical fears join China’s covid-led lockdown and activity contraction in April to weigh on the risk-barometer AUD/USD prices.

Hence, the latest rebound remains elusive and may reverse should today’s US ISM Manufacturing PMI for April, expected at 58.0 versus 57.1 prior, disappoint traders. Earlier in the day, Markit and AiG both came out with upbeat figures of Australia’s PMI for April but the weekend readings of China’s NBS activity numbers cloud the road for bull’s return.

Tuesday’s Reserve Bank of Australia’s (RBA) monetary policy meeting becomes more important for the AUD/USD prices as the policymakers have recently shifted towards the rate hike signals, suggesting a 0.15% increase in the benchmark rate. However, the AUD/USD may not be able to cheer the RBA-led gains if the Fed extends its fire-fighting role against inflation, via a 0.50% rate hike and clues for the balance-sheet normalization.

Read: AUD/USD Outlook: Seems vulnerable to retest YTD low, focus remains on RBA/FOMC

Technical analysis

AUD/USD recovery remains elusive until the quote provides a daily closing beyond the August 2021 bottom of 0.7105. On the downside, the yearly low of 0.6966 lures the bears.