AUD/USD pares gains below 0.6900 as risk-aversion gathers steam

• AUD/USD bears making a comeback below 0.6900, as risk-off flows ramp up.
• US dollar extends rebound with yields, as rate hike fears and gas crisis spook markets.
• China’s PMIs-led upside appears elusive ahead of critical US ADP jobs data.

AUD/USD is paring back gains towards 0.6850, turning south following a rejection above the 0.6900 round figure. Bears are fighting back control amid strengthening risk-off flows in the European session.

The European stocks erased early gains and trade negative, as fears over the ECB and Fed aggressive tightening combined with the worsening European gas crisis spook markets. Investors seek refuge in the safe-haven US dollar at the expense of the higher-yielding aussie in times of market panic.

Concerns over fresh covid lockdowns in China compounded as many cities are under shutdown already due to the energy crisis in the world’s second-largest economy. The health of China’s economy is back under question, adding to the weight on the Chinese proxy, the AUD.

The aussie traders also refrain from placing any large bets ahead of the critical US ADP Employment Change data, as any upside surprise in the print could trigger a fresh dollar buying and catch AUD bulls off guard.

The ADP is likely to show an addition of 200K jobs in the American private sector this month. The data could be seen as a percussor to Friday’s NFP release and have a significant impact on the market’s pricing of the 75 bps September Fed rate hike, which now stands at 70%.

Earlier in the Asian session, AUD/USD caught a sold bid and briefly recaptured the 0.6900 level, as bulls cheered upbeat official Chinese Manufacturing and Services PMIs. Both the gauge surpassed market expectations and sparked hopes for a turnaround in Chinese business activity.

AUD/USD: Technical levels to consider