AUD/USD retreats from monthly high below 0.7000 on dicey markets, Aussie Inflation, Fed eyed

• AUD/USD eases from five-week top, pares recent gains amid sluggish session.
• Growth concerns, pre-Fed chatters join anxiety ahead of Australia Q2 CPI to tame the bullish bias.
• US Consumer Confidence will decorate today’s calendar, buyers keep reins.

AUD/USD steps back from monthly high while taking offers to pare intraday gains around 0.6960 during early Tuesday morning in Europe. The Aussie pair’s latest pullback could be considered as the market’s preparations for the key data/events. However, a softer US dollar and hopes of firmer Australian inflation data appear to keep the buyers hopeful.

That said, the US Dollar Index (DXY) rebounds from its intraday low to 106.37, down 0.10% intraday by the press time. In doing so, the greenback gauge drops for the fourth consecutive day despite the latest bounce.

The US dollar’s recent recovery, as well as the AUD/USD pullback, could be linked to the talks surrounding the economic weakness in the US, as well as abroad. The recession fears initially gained clues from Monday’s Chicago Fed National Activity Index for June and Dallas Fed Manufacturing Index for July, preceded by Friday’s US S&P Global PMIs for July. On the same line was Walmart’s slashing of profit forecasts and fears of lesser consumer spending.

It’s worth noting that a rebound in the US Treasury yields from the daily low, to 2.79% at the latest, also underpins the rebound in the US dollar and weighs on the AUD/USD.

Moving on, AUD/USD traders should pay attention to the US CB Consumer Confidence for July, prior 98.7, as well as chatters surrounding recession for fresh impulse. However, Wednesday’s Australia Consumer Price Index for the second quarter (Q2), expected 6.2% YoY versus 5.1% prior, will precede the Federal Open Market Committee (FOMC) meeting to mark the key day for the Aussie pair traders. It’s worth noting that Australia’s push to China, for removing trade sanctions, could join the recently mixed comments from the Reserve Bank of Australia (RBA) to weigh on the quote if the Q2 CPI arrives short of market forecasts.

Also read: Fed Preview: Powell to reignite dollar rally with promise to crush inflation, whatever the cost

Technical analysis

Despite the latest run-up, AUD/USD remains inside a short-term trading area between 0.6955 and 0.6975 levels comprising a downward sloping resistance line from early April and 50-DMA in that order.