AUD/USD pokes 0.6900 amid anxiety over unidentified objects, Fed, focus on US inflation, Aussie employment

• AUD/USD holds lower grounds near one-week bottom, down for the second consecutive day.
• Indecision over the “unidentified objects” flying over US, China give rise to market’s anxiety.
• Fed speak appears mixed ahead of the key US CPI.
• Aussie jobs report also becomes important as RBA remains hawkish.

AUD/USD sellers attack the 0.6900 support amid market’s cautious mood during early Monday, after surprisingly ignoring the US Dollar strength to post weekly gains in the last.

Anxiety surrounding the “unidentified objects” flying over the US and Chinese airspace gave rise to the market’s cautious mood in addition to the US Federal Reserve (Fed) talks. Also weighing on the risk barometer pair could be the pre-data mood ahead of the US Consumer Price Index (CPI) for January, up for publishing on Tuesday.

The US and China’s shootings of unidentified objects, with the White House alleging China over spying, seems to weigh on the market sentiment and the risk-barometer AUD/USD pair. Recently, the US General allowed Aussie buyers to take a breather while saying that they have no reason to think latest objects are Chinese. It’s worth noting that the US shot down nearly four such objects while China prepares to down one in nearly a week’s time.

On the other hand, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  Comments from Fed’s Harker were in line with Fed Chairman Jerome Powell and Richmond Federal Reserve (Fed) President Thomas Barkin who previously refrained from cheering upbeat US jobs report.

Alternatively, the majority of the Fed Governors and the US diplomats, including US President Joe Biden and Treasury Secretary Janet Yellen, ruled out US recession concerns and appear hawkish for the Fed. Hence, there prevails a dilemma among the Fed policymakers which in turn makes this week’s US inflation data all the more important.

That said, preliminary readings of the US University of Michigan (UoM) Consumer Sentiment for February rose to 66.4 versus 65.0 expected and 64.9 prior. Further, the UoM noted that the year-ahead inflation expectations rebounded to 4.2% this month, from 3.9% in January and 4.4% in December.  “Long-run inflation expectations (5-year) remained at 2.9% for the third straight month and stayed within the narrow 2.9-3.1% range for 18 of the last 19 months,” stated the UoM. Further, the US Bureau of Labor Statistics announced on Friday that it revised the monthly Consumer Price Index (CPI) for December to +0.1% from -0.1%, based on updated seasonal adjustment factors.

It’s worth observing that the Reserve Bank of Australia’s (RBA) hawkish hike in the last week allowed the AUD/USD to remain firmer but the cautious mood and expectations of downbeat Aussie jobs report, versus the firmer US inflation data, seems to tease AUD/USD bears.

While portraying the mood, S&P 500 Futures print mild losses and the US Treasury bond yields remain sidelined.

Moving on, a light calendar on Monday highlights the risk catalysts as the key for the AUD/USD pair traders to watch for clear directions.

Technical analysis

A two-month-old ascending support line, near 0.6900 by the press time, restricts immediate AUD/USD downside.