AUD/USD extends bounce off two-month low towards 0.6750 on upbeat China PMI

• AUD/USD rebounds from multi-day low on upbeat data from key customer.
• China’s official and Caxin PMIs flash upbeat figures for February.
• Downbeat Aussie GDP, inflation data joined risk-off mood to print recent trough.

AUD/USD picks up bids to reverse early losses to around 0.6730 after China data pleased Aussie bulls, after an initial disappointment from the statistics at home, during early Wednesday.

China’s Caixin Manufacturing PMI rose to 51.6 versus 50.2 expected and 49.2 for February. In doing so, the private manufacturing activity gauge traced the official numbers. Earlier in the day, China NBS Manufacturing PMI jumped to 52.6 compared to 50.5 market forecasts and 50.1 prior. More importantly, Non-Manufacturing PMI rallied to 56.3 versus analysts’ expectations of 49.7 and 54.4 previous readings.

Also read: China's Caixin Manufacturing PMI expands to 51.6 in February vs. 50.2 expected

It’s worth noting that the downbeat prints of Australia’s fourth-quarter (Q4) Gross Domestic Product (GDP) and Monthly Consumer Price Index (CPI) data for January earlier drowned the AUD/USD pair towards refreshing the two-month low. Talking about that, Aussie Q4 GDP came in lower than expected 0.8% and 0.6% prior readings while flashing 0.5% quarterly growth. The yearly GDP growth, however, matches 2.7% market consensus, down from 5.9% prior. On the same line was the monthly CPI data for January as it dropped to 7.4% versus 8.0% expected and 8.4% prior.

Elsewhere, fears of more inflation and higher rates seem to have weighed on the market sentiment and propelled the US Treasury bond yields, while also exerting downside pressure on the stock futures. The same joins chatters that China President Xi Jinping is up for a big overhaul of Chinese government agencies and a likely increase in the US-China tension, signaled by Bloomberg.

To sum up, AUD/USD cheers upbeat data from the key customer to lure buyers but the upside bias remains absent amid the hawkish Fed concerns and inflation fears. That said, the US ISM Manufacturing PMI for February will be important for intraday directions.

Technical analysis

AUD/USD bulls need validation from the 200-DMA hurdle surrounding 0.6800 to retake control.