AUD/USD retreats to 0.6600 amid renewed US-Sino woes, focus shifts to RBA

• AUD/USD is seeing fresh selling pressure at the start of a new week.
• China, US fundamentally disagree over Taiwan, global rules.
• US Dollar holds the post-NFP rally, focus shifts to the RBA decision.

AUD/USD is seeing a negative start to the Reserve Bank of Australia (RBA) decision week, as investors digest the latest concerning developments between the US and China over Taiwan and over a range of other issues, including Taiwan, semiconductor chip exports etc.

Speaking at Asia’s top security summit, the Shangri-La Dialogue on Sunday, Chinese Defence Minister Li Shangfu warned, “it is undeniable that a severe conflict or confrontation between China and the US will be an unbearable disaster for the world.”

US Secretary of Defense Lloyd Austin told the meeting that Washington was “deeply committed” to preserving the status quo in self-ruled Taiwan that Beijing claims as its own territory.

Meanwhile, a Chinese warship came within 150 yards (137 meters) of a US destroyer in the Taiwan Strait in "an unsafe manner," US military officials said, In response, China blamed the US for "deliberately provoking risk" in the region.

Besides the renewed tensions between the US and China, AUD/USD also remains weighed down by a broadly stronger US Dollar, especially in the wake of a stunning US Nonfarm Payrolls print.

The US economy added 339K jobs in May vs. 190K expected and the upwardly revised previous reading of 294K. The wage inflation component in the jobs report softened to 4.3% while the Unemployment Rate in the US ticked higher to 3.7% in the reported period, compared with expectations of 3.5%. However, following the mixed US employment data, markets continued to price a 75% probability that the US Federal Reserve (Fed) will pause at the June 13-14 policy meeting.

Attention now turns toward the Chinese Caixin Services PMI, US ISM Services PMI due later in the day ahead. Although investors eagerly await the RBA policy announcements on Tuesday for a fresh direction in the pair. The RBA is expected to hold rates at 3.85% in June but economists and money markets remain divided over its next move as lingering price pressures and recovering home prices suggest a hike may be needed while weaker activity and rising unemployment argue for a pause.

AUD/USD: Technical levels to consider