AUD/USD pulls back from weekly top towards 0.7000 with eyes on Fed’s Powell

• AUD/USD takes offers from weekly high to pare recent gains after two-day uptrend.
• US Dollar Index consolidates weekly losses amid market’s indecision.
• WTO’s push for 'unprecedented package' of trade agreements joins softer yields to test intraday bears.
• Fed’s Powell needs to defend 75 bp rate hike to recall US dollar bulls.

AUD/USD takes offers to renew intraday low around 0.7030, snapping a two-day uptrend while stepping back from the weekly top. In doing so, the risk-barometer pair portrays the market’s lack of clarity, as well as the US dollar’s rebound, amid a quiet Asian session on Friday.

That said, the US Dollar Index (DXY) recovers from the weekly near 103.40 to 104.00 at the latest. In doing so, the greenback gauge ignores downbeat Treasury yields. The reason could be linked to the market’s fears that central bank aggression could trigger the global recession, as well as the cautious mood ahead of the Fed’s bi-annual Monetary Policy Report and Fed Chairman Jerome Powell’s speech.

US 10-year Treasury yields dropped during the last two consecutive days, to 3.243% at the latest as the Fed’s 0.75 rate increase couldn’t impress bulls. Additionally, Aggressive momentary policy actions from the Swiss National Bank (SNB) and Bank of England (BOE) seem to join the downbeat US data to weigh on the US bond coupons.

US Building Permits and Housing Starts eased in May to 1.695M and 1.549M respectively while the Initial Jobless Claims 4-week average inched up to 218.5K versus 215K expected during the period ended on June 10. Further, Philadelphia Fed Manufacturing Survey printed a negative figure of -3.3 for June, the first such contraction since May 2020.

On the contrary, the latest comments from the World Trade Organization (WTO) Chief Ngozi Okonjo-Iweala also seem to underpin the market’s optimism about overcoming the latest supply crunch problems and should have favored the AUD/USD buyers but could not. “The World Trade Organization (WTO) Chief presented countries with a series of draft trade agreements early on Friday that included pledges on health, food security and urged that they be accepted as a major meeting stretched into its second day of overtime,” said Reuters during early Friday’s Asian session.

While portraying the mood, the S&P 500 Futures print 0.30% intraday gains after losing around 3.25% on Wall Street.

Given the lack of major data at home, AUD/USD traders will pay attention to the risk catalysts and the US Industrial Production for May, expected at 0.4% versus 1.1% prior, for intermediate directions ahead of a speech from Fed’s Powell.

Technical analysis

AUD/USD retreats from the 10-day EMA, around 0.7050 by the press time, which in turn joins bearish MACD signals and steady RSI (14) to keep sellers hopeful of retesting the monthly low surrounding 0.6850.