AUD/USD bulls take a breather at 16-week high below 0.6900 as Fed hawks retreat, more US data eyed

• AUD/USD retreats from the highest levels since late February, consolidating the biggest daily jump in two months.
• Upbeat sentiment, PBoC rate cut and fewer threats to the hawkish RBA concerns propel Aussie pair.
• Downbeat US data, ECB play drowned US Dollar and favored AUD/USD bulls.
• Mid-ties US statistics, yields eyed for clear directions on July Fed rate hike.

AUD/USD dribbles at the highest levels since February 21, making rounds to 0.6880-90, amid the early hours of Friday’s Asian session after rising the most since mid-April the previous day. In doing so, the Aussie pair traders portray the market’s consolidation move amid a lack of major data/events after a volatile day.

That said, the risk-barometer pair benefited from the strong Aussie jobs report versus downbeat US data, as well as the People’s Bank of China (PBoC) rate cut to post the stellar run-up.

On Thursday, Australia’s Consumer Inflation Expectations for June rose to 5.2% versus the 4.8% expected and 5.0% prior. Further, the Employment Change rallied by 75.9K in May compared to 15K market forecasts and -4.3K previous readings. Additionally, Australia's Unemployment Rate drops to 3.6% against expectations of witnessing a no-change figure of 3.7%.

On the other hand, US Retail Sales growth marks an increase of 0.3% for May versus -0.1% expected and 0.4% previous readings while the Core readings, mean Retail Sales ex Autos, match 0.1% market forecasts for the said month, compared to 0.4% prior. Further, NY Fed Empire State Manufacturing Index jumps to 6.6 in June versus -15.1 expected and -31.8 prior whereas Philadelphia Fed Manufacturing Index drops to -13.7 for the said month from -10.4 prior and compared to -14 market forecasts. Additionally, US Industrial Production for May cools down to -0.2% against 0.1% estimated and 0.5% prior while Initial Jobless Claims reprints the upwardly revised figures of 262K for the week ended on June 09 versus 249K expected.

It should be noted that the PBoC cut its one-year interest rate for the first time in 10 months, by 10 basis points (bps), which in turn unleashed hopes of more liquidity in Australia’s biggest customer and favored the AUD/USD price.

Elsewhere, the European Central Bank’s (ECB) 25 basis points (bps) interest rate hike and clues of more such moves ahead also weighed on the US Dollar and propelled the price.

In doing so, the AUD/USD pair pays little heed to the downbeat China Retail Sales and Industrial Production while also failing to justify a nearly 67% chance of the Fed’s July rate hike.

Amid these plays, Wall Street benchmarks rallied more than 1.0% each whereas the US 10-year Treasury bond yields plummeted to 3.72%. Further, the US Dollar Index (DXY) dropped the most in three months while poking the lowest levels since May 12, to 102.15 at the latest.

Moving on, preliminary readings of the Michigan Consumer Sentiment Index (CSI) for June and five-year inflation expectations will be in the spotlight as the Fed hawks find less acceptance.

Also read: AUD/USD Forecast: Aussie not getting tired, accelerates higher

Technical analysis

Although the overbought RSI conditions challenge the AUD/USD bulls at a multi-day high, a daily closing beyond a 3.5-month-old ascending resistance line, now support around 0.6835, keeps the Aussie pair buyers hopeful despite the latest pullback in the price.