AUD/USD retreats towards 26-month low near 0.6700 as recession fears dominate

• AUD/USD remains pressured around multi-month low amid sour sentiment, mixed data.
• Aussie NAB Sentiment data arrived mixed for June, economic slowdown woes prevail amid record-high US inflation expectations.
• Risk catalysts are the key to intermediate directions ahead of Aussie employment.

AUD/USD fades bounce off intraday low as sour sentiment weighs on the risk-barometer pair during Tuesday’s Asian session. That said, the quote drops to 0.6725 at the latest as bears approach the two-year low marked the previous day around 0.6700.

In addition to the risk-off mood, mixed sentiment data from Australia and caution ahead of Thursday’s Aussie employment numbers also exert downside pressure on the AUD/USD prices of late.

Talking about the data, National Australia Bank’s (NAB) Business Conditions and Business Confidence figures for June failed to impress AUD/USD buyers. That said, the Business Conditions rose to 13, versus 9 expected and prior 16, whereas the Business Confidence dropped to 1 from 8 expected and 6 previous.

On a major front, a record high print of the US one-year inflation expectations, as per the NY Fed’s survey of one-year-ahead consumer inflation expectations, join chatters surrounding economic slowdown to weigh on the AUD/USD prices. That said, the NY Fed’s inflation precursor jumped to 6.8% in June, versus 6.6% prior.

Also contributing to the market’s pessimism are the hopes of the Fed’s aggression, previously backed by the latest US jobs report. As per Friday’s release, the US Nonfarm Payrolls (NFP) rose by 372K for June, versus expected 268K and downward revised 384K prior while the Unemployment Rate remained unchanged at 3.6%.

Considering the data, White House Press Secretary Karine Jean-Pierre told reporters that she expects new Consumer Price Index (CPI) data to be highly elevated. Further, Atlanta Fed President Raphael Bostic said that recent inflation data has not been as encouraging as I would have liked, per Reuters.

It’s worth noting that Shanghai’s first coronavirus Omicron sub-variant BA-5 case escalated virus woes and public outrage after the dragon nation failed to sustain the unlock activities. Moreover, strong inflation data from the Asian major and doubts over Beijing’s GDP goal, as well as on the stimulus’ ability to renew optimism, also spoil the mood and keep AUD/USD sellers hopeful.

While portraying the mood, US equities remained depressed and the US Treasury yields kept flashing recession fears by inversion of the 10-year and 2-year Treasury yields curves. Further, Asian stocks and S&P 500 Futures also remain pressured at the latest.

Given the lack of major data up for publication on Tuesday, AUD/USD traders keep their eyes on the risk catalysts for fresh impulse. However, major attention will be given to Thursday’s Australia jobs report for June as RBA hawks appear running out of steam of late.

Technical analysis

A one-month-old bearish channel restricts AUD/USD moves between 0.6710 and 0.6890. That said, the oversold RSI conditions challenge sellers targeting March 2020 peak surrounding 0.6685.