AUD/USD bulls trace iron ore rebound, softer USD to aim for 0.6850 ahead of US data

• AUD/USD takes the bids to refresh intraday high, prints the first daily gains in three.
• Softer yields, upbeat Aussie trade numbers favor buyers, recovery in iron ore joins USD pullback to extend gains.
• Fears of economic slowdown, covid-linked lockdown in China challenge corrective pullback.
• Updates over recession, China’s covid conditions will be the key, US ADP Employment Change to decorate calendar.

AUD/USD consolidates recent losses around a two-year low as it takes the bids to refresh its intraday high around 0.6830 heading into Thursday’s European session.

The Aussie pair’s latest recovery could be linked to the upbeat Australian employment data and the US dollar’s pullback. Also favoring the pair buyers is the recovery in prices of Australia’s key export item, namely iron ore.

As per the latest trade numbers from the Australian Bureau of Statistics, the headline Trade Balance rose to 15,965M in May versus 10,725M expected and 10,495M prior. Further details reveal that Exports rose 9.0% from 1.0% prior and Imports grew 6.0% compared to the previous contraction of 1.0%.

Elsewhere, US Dollar Index (DXY) retreats from the 20-year high, marked the previous day, while flashing 0.20% intraday losses around 106.90 level. The greenback’s gauge versus six major currencies tracks downbeat US Treasury yields to pare recent gains ahead of the key employment data.

Additionally, Reuters stated that the most-traded iron ore on the Dalian Commodity Exchange climbed 5% to 764 yuan ($114.02) a tonne as of 04:29 GMT and the August contract on the Singapore Exchange gained 1.9% at $113.30 a tonne. The news marked the consolidation of the previous 5.0% slump and US dollar weakness as the key catalysts for the metal’s latest recovery.

It’s worth noting that the recently higher covid numbers from Shanghai and mass testing in Beijing renew China lockdown fears and keep AUD/USD buyers on their toes. On the same line are fears of global economic slowdown and the Fed’s aggressive rate hikes.

Looking forward, fears of global recession can exert downside pressure on the AUD/USD prices and the same could magnify if the US ADP Employment Change for June prints strong numbers, expected 200K versus 128K prior.

Technical analysis

AUD/USD directs bounce off a downward slopping trend line from January, around 0.6750, to aim for the monthly resistance line near 0.6845 at the latest. However, bears remain hopeful until the quote stays below the previous support line from May, close to 0.6865 by the press time.