AUD/USD defends 0.7090 after China data dump ahead of Fed’s verdict

• AUD/USD consolidates weekly losses, snaps two-day downtrend.
• China Retail Sales eased below 4.6% YoY forecast, Industrial Production crossed prior and expected figures in November.
• Market sentiment dwindles amid mixed concerns over Omicron, stimulus and inflation.
• Fed is expected to faster tapering, signal rate hikes but virus woes test policy hawks.

AUD/USD remains sidelined, recently picking up bids to 0.7110 during early Wednesday. The Aussie pair trader’s latest indecision could be linked to the mixed data from the biggest customer China and anxiety ahead of the key Federal Reserve (Fed) monetary policy meeting.

China’s Retail Sales dropped below 4.6% forecast and 4.9% prior to 3.9% YoY in November whereas Fixed Asset Investments (YTD) eased to 5.2% from 5.4% expected and 6.1% previous readouts. Further, Industrial Production (IP) data jumped past 3.6% market consensus and 3.5% prior to 3.8% during the stated month. Earlier in the day, Australia’s Westpac Consumer Confidence for December slumped to -1.0% versus +0.6% previous readouts.

That said, the US Treasury yields and the S&P 500 Futures remain sluggish while portraying the pre-Fed market sentiment. On the same line is a mixed performance by the Asia-Pacific stocks.

Fears that Australia’s most populous state New South Wales will have 25k new covid cases daily, per a model shared by ABC News, battles the hopes of the vaccines to overcome the virus variant. On the other hand, the UK is likely to witness further Omicron-linked hardships while the COVID-19 strain also spreads in the West faster and challenges the policy hawks of late.

Additionally testing the Fed bulls and optimists is a drop in the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, to an 11-week low versus a record high Producer Price Index (PPI) for November.

Looking forward, today’s Federal Open Market Committee (FOMC) decision is crucial for markets ahead of tomorrow’s Aussie jobs report.

Read: Fed Interest Rate Decision Preview: Can the FOMC satisfy and mollify the markets?

Technical analysis

A 15-day-old horizontal line near 0.7090 restricts short-term declines of the AUD/USD prices. Meanwhile, the 100-SMA level of 0.7135 and September’s low surrounding 0.7175 become the key hurdles to the north.