AUD/USD eases towards 0.6400 as sentiment sours on China, US banking concerns

• AUD/USD fades week-start optimism on downbeat risk profile amid sluggish session.
• S&P Global Ratings follows Moody’s in downgrading US banks’ credit ratings.
• Fears about China’s inability to renew growth cycle, geopolitical concerns weigh on Aussie pair.
• Risk catalysts, second-tier US data and Fed talks may entertain intraday traders but Jackson Hole Symposium is the key.

AUD/USD remains depressed around the intraday low of 0.6407 as risk aversion joins sluggish momentum early Tuesday.

The Aussie pair’s latest weakness could be linked to the multi-year high US Treasury bond yields and the fears emanating from the US banking sector, not to forget China woes.

That said, the S&P Global Ratings downgrades several US banks while highlighting the negative impacts of the higher rates and a decline in deposits. It’s worth noting that Moody’s initiated such moves early in August and triggered the risk-off mood.

With this, the US Treasury bond yields refresh the highest level since November 2007, to 4.36% at the latest, whereas S&P500 Futures fade the previous two-day rebound from the nine-week low.

Additionally, China’s efforts to defend the post-COVID economic recovery, via a slew of stimulus measures, fail to impress market optimists and exert downside pressure on the AUD/USD pair, due to the Aussie-China trade ties.

On Monday, the People’s Bank of China (PBOC), lowered the one-year Loan Prime Rate (LPR) to 3.45% from 3.55% previous and 3.40% expected. However, the Chinese central bank kept the five-year LPRs unchanged at 4.20%.

On the same line, Chinese state media Xinhua unveiled the news stating the authorities’ plan to introduce subsidies for fertilizers and pesticides in the northern region of the nation, per Reuters. Furthermore, the weekend news from China suggests the policymakers’ plan to infuse more liquidity into the world’s second-largest economy.

Alternatively, the Financial Times (FT) reported during the weekend that China pushes for competition with the Group of Seven (G7) nations while marking its presence at the BRICS meeting where officials from Brazil, Russia, India, China and South Africa spoke. Additionally, the fresh tension between China and Taiwan adds strength to the geopolitical fears but fails to gain major attention amid the cautious mood ahead of this week’s top-tier data/events.

To sum up, a light calendar at home joins the market’s anxiety ahead of this week’s August month Purchasing Managers Indexes (PMIs) and Durable Goods Orders for July, as well as the central bankers’ speeches at the annual Jackson Hole Symposium event, to prod AUD/USD rebound. That said, the US Existing Home Sales for July and Richmond Fed Manufacturing Index for August will join speeches from the mid-ties Federal Reserve (Fed) officials to direct intraday moves of the Aussie pair.

Technical analysis

Despite the latest inaction, a one-month-old falling wedge bullish chart formation, currently between 0.6450 and 0.6315, lures AUD/USD buyers.