AUD/USD bears eye 0.6100 on triangle break, focus on Aussie Retail Sales, Fed’s Powell

• AUD/USD remains depressed at 28-month low, prints a four-day downtrend.
• Market’s pessimism weighs on Aussie pair due to its risk-barometer status, links with China exert additional downside pressure.
• Australia’s Retail Sales for August, Fed Chair Powell’s speech will be watched for a corrective bounce.

AUD/USD justifies its risk-barometer status as it holds lower ground near the yearly bottom surrounding 0.6400 during Wednesday’s Asian session. In addition to the sour sentiment, technical breakdown and the anxiety ahead of the key Aussie data also weigh on the pair amid sluggish trading hours of the day.

That said, the quote dropped for the third consecutive day on Tuesday as headlines from Europe and firmer US data propelled the US dollar while China-linked news challenged Antipodeans.

Leaks in Russia’s gas pipeline in the Baltic Sea raise woes that the Eurozone’s energy supply problems are likely to be permanent. The same intensify fears of recession inside the bloc, especially amid an absence of impressive data and inflation fears. That said, Reuters quoted European Commission Chief Ursula von der Leyen on Tuesday saying, “The leaks of the Nord Stream pipelines were caused by sabotage, and warned of the "strongest possible response" should active European energy infrastructure be attacked.” This adds to the market’s fears of more geopolitical tension between the West and Russia.

On the other hand, US Durable Goods Orders declined by 0.2% in August versus the market forecasts of -0.4% and the revised down prior reading of -0.1%. Additionally, US CB Consumer Confidence improved for the second consecutive month to 108.00 for September versus 104.5 expected and 103.20 prior.

Despite the upbeat data, Chicago Fed President Charles Evans said, “At some point, it will be appropriate to slow the pace of rate increases and hold rates for a while to assess the impact on the economy." However, markets cared more for St. Louis Federal Reserve Bank President James Bullard who mentioned that they have a serious inflation problem in the US, as reported by Reuters. "More rate rises to come in future meetings." Additionally, Minneapolis Fed President Neel Kashkari said the central bank is moving "very aggressively," and there is a high risk of "overdoing it." 

It should be noted that the World Bank’s (WB) downbeat economic forecasts for China and chatters that the dragon nation called key market players to defend the equities also printed vulnerabilities in the economy of the biggest customer of Australia.

Against this backdrop, Wall Street closed mixed but the yields remained firmer and underpinned the US dollar’s safe-haven demand.

Looking forward, Australia’s Retail Sales for August, expected 0.4% versus 1.3% prior, will be crucial to watch for immediate directions. Following that, a speech from Fed Chairman Jerome Powell will be important. Given the downbeat expectations from the data and hopes of hawkish Powell, the AUD/USD is likely to witness further downside, which in turn highlights the theoretical target of a triangle breakdown.

Technical analysis

A clear downside break of the three-month-old symmetrical triangle hints at the AUD/USD pair’s south-run towards the 0.6100 threshold. During the fall, the 78.6% Fibonacci Expansion (FE) of April-August moves and the April 2020 low could test bears around 0.6365 and 0.6250 respectively.

Alternatively, recovery remains elusive below 0.6710 support-turned-resistance.