AUD/USD stays mildly offered near 0.6700 amid hawkish Fed bets, China concerns

• AUD/USD grinds lower while fading the previous day’s bounce off two-year low.
• Fears of Sino-American tussles, China’s economic conditions keep bears hopeful.
• Off in Japan and the UK restrict immediate moves amid light calendar, PBOC RRR cut gained a little attention.
• RBA Minutes, Bullock’s speech and Aussie PMIs can entertain traders but nothing more important than the FOMC.

AUD/USD retreats towards the 28-month low marked the previous day, holding lower ground near the 0.6700 threshold ahead of Monday’s European session. In doing so, the Aussie pair justifies the downbeat sentiment amid a sluggish session.

While tracing the clues, headlines surrounding Australia’s biggest customer China and fears of the US Federal Reserve’s (Fed) aggression gain major attention. It should be noted that the mixed comments from Reserve Bank of Australia official Jonathan Kearns also seemed to have exerted downside pressure on the risk-barometer pair.

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Elsewhere, comments from China’s State Planner, National Development and Reform Commission (NDRC), act as an extra negative catalyst for the AUD/USD prices. “Foundation of domestic economic recovery is still weak despite positive changes in main economic indicators,” said China’s NDRC.

It should be noted that the People’s Bank of China (PBOC) cuts the 14-day reverse repo rate by 10 basis points (bps) to 2.15%. “With no reverse repos maturing on Monday, China central bank injects 12 billion yuan on the day,” per Reuters. The same might have signaled that the dragon nation isn’t in the recovery mode and needs more rate cuts than the rate hikes, which in turn could have favored the Aussie pair sellers.

Elsewhere, US President Biden said, “I'm more optimistic than I have been in a long time.” The national leader also stated that they are going to get control of inflation. On the same line are the covid updates from China as it unlocks Dalian and Chengdu cities while witnessing zero coronavirus cases in Beijing and one, versus zero the previous day, outside Shanghai’s quarantine zone. However, US President Biden’s readiness to back Taiwan in case China attacks Taipei and the hawkish hopes for the Fed seem to weigh on the pair price ahead of the key monetary policy announcements.

While portraying the mood, the S&P 500 Futures print mild losses while tracking Wall Street’s Friday close. It should be noted that the off in Japan restricts the bond moves in Asia but the yields are sturdy near the multi-day high amid recession fears and hawkish Fed expectations.

It should be noted that the odds of the Fed’s 75 basis points rate hike (bps) rose to 82% while the market’s expectations of a full one percentage increase in the Fed rate lifted to 18% at the latest.

Looking forward, a light calendar and off in the UK may restrict AUD/USD moves. However, the risk-aversion and the pre-Fed anxiety could keep the pair on the back foot. Also important are the RBA Minutes, comments from RBA policymaker Guy Bullock and preliminary readings of September’s Aussie PMIs.

Technical analysis

AUD/USD bears await a daily closing below the two-month-old support line, close to 0.6700 by the press time, to refresh the multi-month low.