AUD/USD bears eye 0.7000 amid risk-off mood, Aussie jobs report, Fed in focus

• AUD/USD refreshes three-week low during a four-day downtrend, pressured of late.
• Market sentiment roils after Friday’s US inflation propelled hawkish Fed bets, holiday in Australia restricts pair’s latest moves.
• China’s covid conditions, chatter over Sino-American jitters add to bearish bias.
• Aussie jobs report, RBA’s Q1 Bulletin may entertain traders but risk catalysts, Fed are crucial for fresh impulse.

AUD/USD holds lower ground near 0.7030, after refreshing the three-week low, as risk-aversion joins negative headlines from China to favor bears. In doing so, the Aussie pair drops during the fourth consecutive day even as Queen’s Birthday in Australia restricts the pair’s latest moves.

The risk barometer pair’s latest losses could be linked to the market’s increased fears over the Fed’s aggression amid skyrocketing US inflation. The sentiment worsened on Friday after the headline US Consumer Price Index (CPI) rose to 8.6% YoY versus 8.3% expected while the Core CPI jumped 6.0% YoY compared to the expected drop to 5.9% from 6.2% a month earlier. It’s worth noting that the record low of the University of Michigan Consumer Sentiment Index for June, to 50.2 versus revised down 58.1, couldn’t stop the US dollar bulls.

On the other hand, Beijing witnessed a jump in the covid numbers during the weekend and recalled some of the virus-led activity restrictions together with the mass testing. Shanghai is on the same line. Recently, Beijing’s local government spokesman Xu Heijian mentioned that a covid outbreak linked to a bar in Beijing is ferocious.

Also weighing on the market’s mood, as well as the AUD/USD prices are fresh fears of the US-China tussles over Taiwan. China’s Defense Minister Wei Fenghe crossed wires during the weekend stating that China's relationship with the US is at a crossroads. The policymaker also added that they will fight to the end if anyone attempts to secede Taiwan from China. “those who seek Taiwan independence will come to no good end,” said China’s Wei.

Against this backdrop, Wall Street slumped and the US Treasury yields rallied which in turn propelled the US dollar’s safe-haven demand. That said, the S&P 500 Futures drop 1.0% whereas the US 10-year Treasury bond yields remain mostly unchanged around 3.16% at the latest.

Moving on, holidays in Australia may restrict AUD/USD moves during the Asian session but the risk-aversion wave can keep exerting downside pressure on the quote. That said, Wednesday’s Fed decision and Thursday’s Aussie employment data for May will be crucial for the pair traders amid hawkish concerns from the RBA.

Technical analysis

Unless providing a daily close beyond the 20-DMA surrounding 0.7125, AUD/USD remains on the way to a broad horizontal support zone stretched from January, around 0.6955-70.