AUD/USD drops to two-week low near 0.6700 ahead of Australia PPI, Retail Sales and Fed’s favorite inflation

• AUD/USD licks its wounds at 13-day low after a volatile day that ended on a negative side with heavy losses.
• Aussie pair initially cheered Fed-inspired US Dollar weakness and China backed risk-on mood before slumping on US GDP-led greenback rally.
• Australia’s Q2 PPI, Retail Sales for June may entertain Aussie pair traders ahead of US Core PCE Price Index for June.
• Recently firmer US data renew hawkish Fed bets and can offer more US Dollar strength on upbeat inflation clues.

AUD/USD bears attack two-month-old support amid early hours of Friday’s Asian session after a volatile day for the pair that initially refreshed the weekly high before closing with the biggest daily loss in a week to around 0.6700. That said, the quote currently portrays pre-data anxiety following a whippy day that ran from firmer sentiment and softer US dollars to a jump in the greenback and mixed mood.

AUD/USD initially cheered the market’s easing fears of the Federal Reserve’s (Fed) rate hike and upbeat China Industrial Profits, as well as hopes of more stimulus from Beijing, to refresh the weekly top before the US GDP-led slump. Also weighing on the Aussie pair could be the cautious mood ahead of today’s top-tier Aussie and the US data.

US Dollar Index (DXY) posted the biggest daily jump since March 15 the previous day, not to forget mentioning a stellar rebound from the weekly low, as the US statistics recall the Fed hawks and bolstered the Treasury bond yields. It’s worth noting that the Wall Street benchmarks closed with nearly half a percent of daily losses whereas the benchmark US 10-year Treasury bond yields marked the biggest daily jump in a month to refresh a three-week high near 4.02%, close to 4.0% by the press time.

That said, the preliminary readings of the US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) improved to 2.4% from 2.0% prior, versus 1.8% market forecast. On the same line, the US Durable Goods Orders also jumps 4.7% for June compared to 1.0% expected and 1.8% expected (revised). Additionally, Initial Jobless Claims declines to 221K for the week ended on July 21 versus 235K prior and analysts’ estimations of 228K. It should be observed that the US Pending Home Sales for June also improved to 0.3% MoM versus -0.5% expected and -2.5% prior (revised).

However, the first estimations of the US Q2 Core Personal Consumption Expenditure eases to 3.8% QoQ from 4.9% prior and 4.0% market forecasts whereas GDP Price Index edges lower to 2.6% from 4.1% previous readings and 3.0% expected.

At home, Australia’s Export Price Index slumped to -8.5% QoQ while the Import Price Index improved to -0.8% QoQ versus 1.6% and -4.2% respective priors. That said, China's Industrial Profits for the January-June period improve to -16.8% compared to the -18.8% figure marked for the first five months of the year 2023, per China’s National Bureau of Statistics (NBS) data.

Looking ahead, AUD/USD pair traders may witness a lackluster day as top-tier data/events are scheduled for publishing in Asia, as well as in the US session. That said, Australia’s Q2 Producer Price Index, expected to ease to 3.9% YoY from 5.2% prior, will precede the Aussie Retail Sales for June, bearing downbeat forecasts of 0.0% MoM versus 0.7% prior, to entertain traders in Asia. Following that, the Fed’s favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for June, expected 4.2% YoY versus 4.6% prior, will be crucial to watch for clear directions.

Technical analysis

AUD/USD clings to a two-month-old rising support line surrounding 0.6700 after providing the first daily closing beneath the 200-SMA, around 0.6730 by the press time, in more than two weeks.