AUD/USD rebound dwindles near 0.6750 ahead of China GDP, US Retail Sales

• AUD/USD struggles to extend the corrective pullback from two-year low.
• Risk-aversion takes clues from fears of recession, aggressive Fed actions.
• US PPI offered strength to inflation fears but yield curve inversion eased afterwards on mixed Fedspeak.
• China’s Q2 GDP, Retail Sales and US Retail Sales will be important for fresh impulse.

AUD/USD steadies around the mid-0.6700s after bouncing off the lowest levels since June 2020. In doing so, the Aussie pair portrays the market’s cautious mood ahead of important data from the key customer China, as well as from the US. However, risk-aversion due to the fears of the economic slowdown and faster rate hikes by the US Federal Reserve (Fed) keeps the pair sellers hopeful.

The quote’s latest rebound could be linked to the mixed comments from the Fed speakers who tried to talk down the odds of the 100 bps rate hike. On the same line was the CME’s FedWatch tool that showed receding probabilities favoring the 75 basis points (bps) of Fed rate hike during July. Additionally, the receding difference between the 2-year and the 10-year US Treasury yields also helped ease the AUD/USD trader’s pain of late.

At home, the upbeat jobs report for June and Consumer Inflation Expectations for July helped AUD/USD to battle the bears when got the chance. Australia’s Employment Change rose to 88.4K versus 25K expected and 60.6K prior. Further, the Unemployment Rate dropped to 3.5% from 3.9% previous readouts and 3.8% market consensus. Earlier in the day, Australia’s Consumer Inflation Expectations for July came out as 6.3% versus 5.9% expected and 6.7% prior.

Even so, the markets remain dicey as recession fears remain on top ahead of the crucial economics, which in turn exert downside pressure on the AUD/USD pair. The reason for the economic slowdown woes could be linked to Thursday’s firmer US data. That said, the US Bureau of Labor Statistics mentioned that the Producer Price Index (PPI) for final demand in the US climbed to 11.3% on a yearly basis in June from 10.9% in May. This print surpassed the market expectation of 10.7%. Additionally, there were 244,000 Initial Jobless Claims in the week ending July 9 versus the previous week's print of 235,000 and market expectation of 235,000. The Weekly Jobless Claims were the highest in five months.

Amid these plays, Wall Street closed mixed and the US 10-year Treasury yields ended the day around 2.95%, up 0.95% intraday, whereas the 2-year bond coupon dropped 0.75% to 3.12% at the latest.

Moving on, China’s Q2 Gross Domestic Product (GDP) is expected to drop to -1.5% QoQ versus 1.3% prior while the Retail Sales may print a 0.0% YoY figure for June compared to -6.7% previous reading. Further, the US Retail Sales is likely to rise to 0.8% MoM in June from -0.3% marked in May. Should the scheduled data print upbeat figures in China and marked a negative surprise in the US, the AUD/USD may extend the latest rebound.

Also read: US June Retail Sales Preview: Has the consumer turning point arrived?

Technical analysis

Unless providing a daily closing below the one-month-old descending support line, at 0.6695 by the press time, AUD/USD can offer intermediate bounces towards the downward sloping resistance line, around 0.6860 at the latest.