AUD/USD recovery approaches 0.6700 on stimulus hopes, ignores mixed China PMI, Aussie inflation clues

• AUD/USD picks up bids to extend week-start rebound from three-week low.
• China NBS Manufacturing PMI recovers but Non-Manufacturing PMI eases in July.
• Australia TD Securities Inflation improves on MoM, eases on YoY for July.
• Market’s cautious optimism allows Aussie pair to consolidate recent losses ahead of RBA, US ISM PMIs and NFP.

AUD/USD prints the first daily gains in four as it recovers from the lowest levels in three weeks while printing mild gains around 0.6670 during the mid-Asian session on Monday. In doing so, the Aussie pair justifies the market’s slightly positive sentiment and the US Dollar’s retreat while taking positive clues from China’s official activity data and Australian inflation clues.

That said, China’s official NBS Manufacturing PMI edges higher to 49.3 versus 49.2 expected and 49.0 prior but the Non-Manufacturing PMI eases to 51.5 from 53.2 prior.

Further, Australia’s TD Securities Inflation rises to 0.8% MoM for July versus 0.1% previous readings while the yearly figures drop to 5.4% YoY from 5.7% marked in June. Elsewhere, Australia’s Private Sector Credit softens to 0.2% and 5.5% per the MoM and YoY basis in June compared to 0.4% and 6.2% respective priors.

Elsewhere, hopes of witnessing China’s further stimulus to boost demand, per Bloomberg’s news, put a floor under the AUD/USD prices.

Adding strength to the corrective bounce can be the comments from Federal Reserve Bank of Minneapolis President Neel Kashkari suggesting challenges for the US employment sector amid firmer rates. Also weighing on the US Dollar can be Friday’s downbeat inflation clues.

With this, the US Dollar Index (DXY) remains directionless around 101.70 after reversing from a three-week high the previous day on downbeat prints of the Core Personal Consumption Expenditure (PCE) Price Index, mostly known as the Fed’s preferred inflation gauge. It should be noted that the downbeat prints of US Personal Income and softer revision of the US Michigan Consumer Sentiment Index for July, as well as the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations, also triggered the DXY pullback the previous day.

Against this backdrop, Wall Street closed positive and the yields retreated the previous day, slightly firmer by the press time. That said, the S&P500 Futures print mild gains by the press time.

Looking ahead, the US ISM PMIs and the risk catalysts can entertain the AUD/USD traders ahead of Friday’s US jobs report for July will be crucial to watch for clear directions.

Technical analysis

Unless providing a daily closing beyond the 0.6690 support-turned-resistance confluence comprising the 100-DMA and a two-month-old rising trend line, AUD/USD bears stay hopeful of witnessing further downside towards testing the late June swing low of near 0.6600.