AUD/USD retreats from monthly top towards 0.6900 on softer Aussie PMIs, DXY rebound

• AUD/USD takes offers to refresh intraday low, extends pullback from three-week high.
• Australia’s preliminary S&P Global PMIs dropped below market forecasts and prior for July.
• US dollar pares weekly losses as markets reassess post-ECB optimism.
• US PMIs, risk catalysts are the key to fresh impulse.

AUD/USD consolidates the previous day’s losses, after refreshing the monthly peak, as it renews its intraday low at 0.6916 during Friday’s Asian session. The Aussie pair’s latest losses could be linked to the downbeat prints of Australia’s flash readings of S&P Global PMIs for July. The pair also bears the burden of the US dollar’s rebound amid sour sentiment.

That said, Australia’s S&P Global Manufacturing PMI eased to 55.7 in July versus 56.2 prior and 56.4 expected. Further, the S&P Global Services PMI dropped to 50.4 during the stated month compared to 55.0 market consensus and 52.6 prior. Further, the S&P Global Composite PMI also declined to 50.6 versus 52.6 in previous readouts.

On the other hand, the US Dollar Index (DXY) picks up bids to refresh its intraday high around 106.70, up 0.12% on a day, as risk-aversion returns to the table. It’s worth noting that the DXY slumped the previous day as it traced the US Treasury yields wherein the benchmark 10-year bond coupons marked the biggest daily slump since mid-June the previous day.

The fall in yields could be linked to the European Central Bank’s (ECB) higher-than-expected 50 basis points (bps) rate hike, as well as the announcement of a new tool called the Transmission Protection Instrument (TPI) to tame disorderly market dynamics in the bloc.

Elsewhere, the resumption of gas flow to Europe by Russia’s Nord Stream 1 pipeline also favored the market sentiment and helped AUD/USD buyers the previous day.

Against this backdrop, Wall Street benchmarks closed firmer and the US Treasury 10-year Treasury yields marked the biggest daily slump in five weeks. That said, S&P 500 Futures drops 0.50% by the press time.

The latest weakness in the market’s sentiment emanates from the recheck of the optimism following the ECB’s verdict, as well as the pre-established fears of recession and covid.

That said, the risk-off mood can weigh on the AUD/USD prices moving forward. However, downbeat forecasts of the US PMIs for July keep buyers hopeful.

Technical analysis

Despite the latest pullback, AUD/USD remains well beyond the weekly support line, at 0.6890 by the press time, which in turn keeps buyers hopeful of challenging the 50-DMA hurdle surrounding 0.6975.