AUD/USD: Mild bid around 0.6750 as US Dollar traces offbeat yields, US ISM Services PMI eyed

• AUD/USD grinds near intraday high, defends the first weekly gains in three.
• Bulls keep the reins amid hopes of US-China peace on trade, upbeat China data and mixed Aussie statistics.
• Fresh talks of Fed’s pivot trigger retreat in yields and propel Aussie pair.
• Markets remain dicey ahead of US ISM Services PMI, limiting AUD/USD moves.

AUD/USD appears well-set to snap a two-week downtrend as it seesaws around the intraday top of 0.6752 during early Friday in Europe. In doing so, the Aussie pair cheers the US Dollar’s pullback amid risk-positive headlines about China. However, the cautious mood ahead of the US ISM Services PMI and mixed Aussie data, not to forget chatters of the Reserve Bank of Australia’s (RBA) policy pivot, seems to probe the bullish bias.

Talks surrounding the resumption of the Sino-American trade dialogue seemed to have triggered the market’s optimism of late, which appears to favor the AUD/USD buyers. On the same line could be the hopes for an easy monetary policy from the People’s Bank of China (PBOC). However, the US-China tension at the Group of 20 Nations (G20) meeting, amid the former’s push for sanctions on countries having strong ties with Russia and aiding Moscow in the war with Ukraine, pokes the optimism and checks the Aussie pair’s upside momentum.

It should be noted that the firmer China data and mixed Aussie figures, as well as the unimpressive US statistics, also challenge the pair traders. That said, China’s Caixin Services PMI traced the latest activity data for the dragon nation while printing 55.00 figures for February, versus 50.0 market forecasts and 52.9 previous readings. At home, Australia’s S&P Global PMIs for February came in firmer and help the AUD/USD buyers to keep the reins. Though, downbeat prints of Australia Home Loans and Investment Lending for Homes, for January, seem to cap the quote of late.

On the other hand, the US Jobless Claims dropped to 190K during the week ended on February 24 versus 195K market forecasts and 192K prior. Further, Nonfarm Productivity for the fourth quarter (Q4) eased to 1.7% from 3.0% prior and 2.6% market forecasts while the Unit Labor Costs jumped 3.6% versus 1.6% analysts’ estimations and 1.1% previous readings.

Elsewhere, Thursday’s statements from Federal Reserve Bank of Atlanta President Raphael Bostic renewed concerns about the Fed’s policy pivot as the decision-maker said, “The central bank could be in a position to pause the current tightening cycle by mid to late summer.” It should be observed, however, that Boston Fed President Susan Collins kept supporting the higher rates for longer as she said, “More rate hikes are required to bring inflation back in control.”

Against this backdrop, the 10-year coupons drop two basis points to 4.05% while its two-year counterpart seesaws around 4.89% by the press time. Further, S&P 500 Futures struggle for clear directions after mild losses.

The latest Reuters poll suggesting a peak in the RBA rate during the second quarter (Q2) of 2023 joins the polls suggesting the Fed’s policy pivot to challenge the AUD/USD traders. To overcome the indecision, today’s US ISM Services PMI, expected at 54.5 versus 55.2 prior readings, will be crucial ahead of the next week’s key events.

Technical analysis

AUD/USD portrays a one-month-old falling wedge bullish chart formation. However, a clear break of the 0.6775 hurdle becomes necessary for the buyers to retake control.