AUD/USD eases below 0.6800 on mixed China trade data, Australia Annual Budget, US debt-ceiling in focus

• AUD/USD remains pressured around intraday low during the first loss-making day in seven.
• China Trade Balance improves in USD terms, eases per CNY rates while Exports, Imports both drop in April.
• Sour sentiment, firmer yields underpin US Dollar’s corrective bounce ahead of the key debt ceiling talks.
• Australia’s annual budget, up for publishing around 09:30 AM GMT, eyed for immediate directions.

AUD/USD holds lower grounds near 0.6775, extending pullback from intraday high during the first daily loss in seven amid early Tuesday. In doing so, the Aussie pair justifies mostly downbeat China trade numbers for April, as well as softer Aussie Retail Sales figures, amid sour sentiment.

China’s headlines Trade Balance rose to $90.21B in April versus $71.6B expected and $88.19B prior while the CNY figures eased to 618.44B compared to 637.16B market forecasts and 601.01B prior. It’s worth noting, however, that the Exports and Imports declined in the said month on both the USD and Chinese Yuan (CNY) terms.

Also read: China’s April Trade Balance: Surplus expands amid another exports surge

Earlier in the day, Australia’s first quarter (Q1) Retail Sales shrank 0.6% versus -0.4% market forecasts and -0.2% prior readings while Westpac Consumer Confidence for May slumps to -1.7% versus 9.4% prior and weighed n the AUD/USD prices.

Apart from the downbeat data from Australia and its biggest customer, AUD/USD also bears the burden of the cautious mood ahead of the key Australia annual budget and the debt ceiling talks.

That said, US President Joe Biden braces to confront Republican House Speaker Kevin McCarthy, Republican Senate Minority Leader Mitch McConnell and top congressional Democrats at the White House on Tuesday. Ahead of the meeting, Reuters shares news suggesting US Treasury Secretary Janet Yellen’s personal reaching out to business and financial leaders to explain the "catastrophic" impact a US default on its debt would have on the U.S. and global economies, two sources familiar with the matter said on Monday.

On a different page, the Federal Reserve’s (Fed) quarterly bank loan survey showed tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms, as well as small firms, over the first quarter.

While portraying the mood, S&P 500 Futures print mild losses around 4,150, the first in three, whereas the US 10-year and two-year Treasury bond yields struggle to extend the three-day uptrend during early Tuesday.

Additionally weighing on the AUD/USD price could be an improvement in the US inflation expectations as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data.

Against this backdrop, S&P 500 Futures print mild losses around 4,150, the first in three, whereas the US 10-year and two-year Treasury bond yields struggle to extend the three-day uptrend during early Tuesday.

Looking forward, hopes of witnessing the first Aussie budget surplus in many years and upbeat measures to favor the taxpayers seem to put a floor under the AUD/USD prices. However, any disappointment won’t be taken lightly amid downbeat market sentiment ahead of the US debt ceiling talks and the US inflation data.

Technical analysis

The 100-DMA hurdle of around 0.6790 joins the nearly overbought RSI (14) line on the daily chart to challenge the AUD/USD bulls. Adding strength to the upside filters is the horizontal area comprising levels marked since mid-February, around 0.6800.