AUD/USD rebounds to 0.6750 on US dollar pullback ahead of second-tier data, Fed

• AUD/USD consolidates the biggest daily loss in 2.5 years.
• Market sentiment improves amid hopes of more stimulus, recovery in commodity prices.
• Australia’s employment data, RBA’s Lowe can entertain traders together with US consumer-centric statistics.
• US inflation-led blow can keep bears hopeful ahead of next week’s FOMC.

AUD/USD picks up bids to pare recent losses around 0.6750 amid Wednesday’s sluggish Asian session. In doing so, the Aussie pair licks its wounds during a sluggish session, after falling the most since March 2020 the previous day.

The quote’s latest rebound could be linked to the comments from US President Joe Biden, as well as hopes of more stimulus from China and a solution to the European energy crisis. However, fears emanating from the US-Taiwan ties and the US inflation numbers keep the AUD/USD bears hopeful.

Recently, US President Joe Biden mentioned, “I'm not concerned about the inflation report released today.” The US leader also added that the stock market does not always accurately represent the state of the economy.

Furthermore, European Union (EU) Chief Ursula von der Leyen’s plans for the energy price capping and US Trade Representative Katherine Tai’s EU visit to meet European Commission Vice President Valdis Dombrovskis also favor the cautious optimism.

It should, however, be noted that the US Treasury bond yields continue to signal the recession woes ahead and hence challenge the pair buyers. That said, the US 10-year Treasury yields poke a three-month high around 3.45% while its two-year counterpart prints 3.80% figures at the latest. With this, the inverted yield curve between the 10-year and the two-year bond coupons keeps suggesting the fears of economic slowdown. On the same line could be Wall Street’s biggest daily slump in two years, as well as cautious moves of the S&P 500 Futures.

Furthermore, headlines suggesting Taiwan’s hosting of multiple foreign lawmakers in Washington to Push China sanctions and US lawmakers voting on financing arms for Taipei also weigh on the AUD/USD prices.

Market sentiment worsened the previous day, which in turn drowned the AUD/USD prices, after the US Consumer Price Index (CPI) for August rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior.

Looking forward, the US Producer Price Index (PPI) can entertain the bears before Thursday’s Australia jobs report and Friday’s speech from the Reserve Bank of Australia (RBA) Governor Philip Lowe. Also important will be Thursday’s August month US Retail Sales and Friday’s preliminary reading of the Michigan Consumer Sentiment Index for September. Above all, next week’s Federal Open Market Committee (FOMC) will be a crucial event for the pair traders to watch for clear directions.

Technical analysis

Unless providing a daily closing beyond the 50-DMA, around 0.6890 by the press time, AUD/USD remains directed towards the yearly low of 0.6680.