AUD/USD pares Fed, RBA inspired rise near 0.6650, Australia trade numbers, China PMI eyed

• AUD/USD grinds lower after three-day uptrend, takes offers of late.
• Fed matches 0.25% rate hike expectations but removal of guidance for further rate increase weighs on US Dollar.
• Hawkish surprise from RBA, upbeat Australia Retail Sales help Aussie pair buyers despite firmer US data.
• Australia’s trade numbers for March, China’s Caixin Manufacturing PMI for April eyed for immediate directions.

AUD/USD pauses recent upward trajectory, especially backed by the Fed vs. RBA play, as it takes offers to 0.6660 during early Thursday morning in Asia. The Aussie pair recently benefited from the US Federal Reserve’s (Fed) hesitance in suggesting further rate hikes, despite announced a 25 basis points (bps) of an increase to the benchmark Fed rate. Also favoring the quote could be the Reserve Bank of Australia’s (RBA) hawkish surprise and upbeat Aussie Retail Sales marked previously. However, US banking fallout fears and US debt ceiling expiration woes seem to underpin the latest decline in the AUD/USD prices.

Fresh selling of PacWest Bancorp and Western Alliance Bancorp shares triggered banking fears across the board, which in turn exerts downside pressure on the AUD/USD prices. On the same line could be the comments from the White House suggesting debt limit default could cost 8.3 million job losses. Further, Reuters said that shares of US regional lenders collapsed in extended trade on Wednesday, with PacWest Bancorp losing over half its value after reports the California bank is exploring strategic options, including a sale.

On Wednesday, the US Federal Reserve lifted its benchmark rate to the highest levels since 2007 by announcing a 0.25% increase, matching market forecasts. The policymakers including Chairman Jerome appeared positive while ruling out fears of banking rout. However, a dropping of the guidance signaling further rate hike gained major attention and weighed on the US Dollar despite the hawkish move.

On the other hand, Australia’s seasonally adjusted Retail Sales for March rose 0.4% versus market expectations of witnessing a 0.2% steady growth number. Further, Australia’s AiG Industry Index for March rose to 20.1 versus -6.1 prior whereas the AiG Manufacturing and Construction PMIs for the said month dropped to -20.2 and -12.4 respective levels versus -5.8 and 5.6 priors in that order. Further, S&P Global Services PMI for April improved to 53.7 versus 52.6 initial forecasts while the Composite PMI also rose to 53.0 from 52.2 first estimations for the said month.

Further, the Reserve Bank of Australia (RBA) surprises markets by lifting the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85%. Not only does the RBA announce a 0.25% rate hike but the Aussie central bank also expects further tightening of the monetary policy. That said, the RBA also revised its inflation and Gross Domestic Product (GDP) forecasts in the latest policy document. Additionally, RBA Governor Philip Lowe repeated that some further tightening may be required to bring inflation back to the 2-3% target within a reasonable timeframe.

Technical analysis

Despite a four-day uptrend, AUD/USD repeatedly fails to provide a daily closing beyond the 21-DMA and a three-week-old descending resistance line, respectively near 0.6675 and 0.6685, which in turn teases sellers.