AUD/USD bounces off two-week low towards 0.6900 after China PMI, focus on US PCE inflation

• AUD/USD remains pressured around intraday low, despite the latest rebound.
• China’s NBS Manufacturing PMI came in softer than expected, Non-Manufacturing PMI crossed forecasts and prior during May.
• Yields stay pressured but stock futures dwindle amid sluggish markets despite recession, inflation fears.
• US Core PCE Price Index for May will be crucial after Fed’s Powell sounds hawkish.

AUD/USD welcomes upbeat China PMI while picking up bids at around a two-week low during Thursday’s Asian session. In doing so, the Aussie pair leans recovers from the recently flashed bottom of 0.6853, at 0.6873 by the press time.

China’s preliminary readings of official PMIs came in better than previous for May. That said, the headline NBS Manufacturing PMI rose to 50.2 versus 49.6 prior, versus 50.4 forecasts. Further, Non-Manufacturing PMI rallied to 54.7 versus 52.5 expected and 47.8 in previous readings.

It’s worth noting that the trader’s anxiety ahead of the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, for May, expected 0.4% MoM versus 0.3% prior,  weighs on the market sentiment and the AUD/USD prices.

While portraying the mood, S&P 500 Futures print a four-day downtrend while the US 10-year Treasury yields drop for the third consecutive day, down one basis point (bp) to 3.087% at the latest. It should be noted that Wall Street closed mixed the previous day even as central bankers reiterated their readiness to battle inflation, even at the cost of short-term economic slowdown.

In addition to the pre-data caution, fears of recession and recently downbeat numbers from China also challenge market optimists and allow AUD/USD bears to keep reins. Even so, the quote is near to the important supports and the pre-data mood signals the corrective pullback ahead of the US PCE inflation numbers.

Also read: US PCE Inflation May Preview: Inflation becomes moot

Technical analysis

Any AUD/USD rebound needs validation from the 10-DMA and a two-week-old resistance line, respectively around 0.6920 and 0.6935. That said, the pair’s sustained trading below a fortnight-old descending trend line and the 10-DMA, not to forget the bearish MACD signals, direct the quote towards the yearly low of 0.6828 even if the adjacent key support line from May 12, near 0.6860, precedes the monthly low of 0.6850 to challenge immediate downside.