AUD/USD edges higher towards 0.6600 ahead of China/US trade numbers amid mixed markets

• AUD/USD remains defensive after bouncing off two-month low, following a three-day uptrend.
• Mixed sentiment, light calendar allow Aussie pair to grind higher.
• Risk catalysts remain mostly unimpressive, seek fresh clues to entertain momentum traders.
• Inflation clues from US, Australia and China will be crucial this week.

AUD/USD stays defensive near 0.6575 after posting a gradual three-day rebound from the lowest level since early June. That said, the Aussie pair witnessed a sluggish start to the key week amid an absence of major data/events, as well as mixed concerns about the US Federal Reserve’s (Fed) next move. Furthermore, concerns about China also troubled the Aussie pair traders.

On Monday, the US Dollar initially remained firmer after the hawkish comments from Federal Reserve (Fed) Governor Michelle Bowman as he said that additional rate increases will likely be needed to lower inflation back to target. However, the greenback dropped afterward as New York Fed President John C. Williams said he expects that interest rates could begin to come down next year. The policymaker also conveyed hopes of witnessing a slightly higher unemployment rate as the economy cooled.

Elsewhere, China's Ministry of Water Resources cited a stronger response for flooding to Level III in Inner Mongolia, Jilin and Heilongjiang while highlighting the recently escalating fears from typhoon Doksuri. The Reuters news also mentioned that China has a four-tier emergency response system, with Level I being the most urgent.

It should be noted that Friday’s downbeat US employment report and chatters that the major central banks are near to the policy pivot allowed market players to take a breather after witnessing the final week of July with a risk-off mood. With this, the sentiment improved and allowed Wall Street to remain firmer while probing the US Treasury bond yields as they consolidated Friday’s heavy fall, which in turn put a floor under the US Dollar.

Moving on, Australia’s Westpac Consumer Confidence and National Australia Bank’s (NAB) Sentiment data for August and July will precede China’s foreign trade data for July will be important to watch for clear directions. Following that, the US Trade Balance for June and the risk catalysts will be eyed. Above all, Wednesday’s China Consumer Price Index (CPI) and Thursday’s Australia Consumer Inflation Expectations, as well as the US CPI, are the key for the AUD/USD pair to watch for a clear guide.

Technical analysis

AUD/USD recovery remains elusive below the bout bottoms marked in late June and early July, around 0.6600 by the press time.