AUD/USD struggles below 0.7000 ahead of RBA Meeting Minutes, US Retail Sales

• AUD/USD dribbles inside 20-pip range, pausing a two-day rebound from mid-2020 lows.
• Yields, stock futures dwindle amid an absence of major macros.
• Softer US data, Fedspeak enabled buyers to ignore downbeat signals from China.
• RBA Meeting Minutes will be observed for rate hike clues, US Retail Sales for April, covid updates important too.

AUD/USD remains sidelined as buyers await the key catalysts after a two-day rebound from multi-month lows. That said, the Aussie pair seesaws between 0.6965 and 0.6985 during the initial Asian session as traders brace for the Reserve Bank of Australia’s (RBA) Monetary Policy Meeting Minutes, as well as the US Retail Sales for April.

After a dull start to the week, the AUD/USD pair managed to cheer the US dollar weakness by extending the previous week’s corrective pullback near a two-year low.

Recently weighing on the quote could be Australia’s weekly ANZ Roy Morgan Consumer Confidence dropped to 89.3 from 90.5.

Also challenging the pair’s upside momentum are covid woes and downbeat data from the biggest customer China. On Monday, China reported downbeat figures for April month’s Retail Sales and Industrial Production, backed by conveying fresh fears over the coronavirus resurgence. That said, Shanghai City Official’s comments and weekend updates from Beijing were the major catalysts to renewing COVID-19 fears. While Shanghai City Official initially mentioned that the city's epidemic is under control, he also stated, “However the risks of rebound remain and we need to continue to stick to controls,” which in turn drowned the market’s risk appetite.

On the flip side, the US Dollar’s pullback could be linked to a fall in the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue. It should be noted that the news suggesting the US extend covid public health emergency beyond July also allowed the US dollar to pare some gains. That said, the US Dollar Index (DXY) eased further from its 20-year top, printed a two-day downtrend as sellers approach 104.00 by the end of Monday’s North American session.

Against this backdrop, Wall Street benchmarks closed mixed and the US 10-year Treasury yields dropped to 2.88%, down 3.6 bps. Further, the S&P 500 Futures remain directionless by the press time.

Moving on, the Minutes of the RBA’s latest meeting will be crucial amid indecision over the size of the next rate hike by the Aussie central bank. Following that, the US Retail Sales for April, expected at 0.7% versus 0.5% prior, will also be important to watch for fresh impulses. Additionally, headlines concerning China’s covid conditions and the Russia-Ukraine crisis are also useful for determining short-term AUD/USD moves.

Technical analysis

AUD/USD bulls attack January 2022 bottom surrounding 0.6965-70 to dominate further. However, lows marked during late 2021 and earlier in the month, respectively around 0.6995 and 0.7030, will challenge the additional upside.

Alternatively, a downward sloping trend line from August 2020, near 0.6820, challenges the pair’s downside moves.