AUD/USD steadies near six-week top around 0.7000 ahead of Aussie Retail Sales, US GDP

• AUD/USD bulls take a breather after rising the most in a week, around 1.5-month high.
• Growth fears from Australia, recession woes in the US probe bulls.
• Fed announced 0.75% rate hike to match market forecasts, Chairman Jerome Powell tried to renew optimism and succeeded.
• Australia’s Retail Sales for June, US preliminary Q2 GDP will be important for fresh impulse.

AUD/USD seesaws near the 0.7000 threshold, after the Fed-inspired rally to the six-week high, as traders await the key data from Australia and the US during early Thursday morning in Asia. In doing so, the Aussie pair justifies the market’s cautious mood amid recently mixed concerns over the US recession and also relating to Aussie GDP, inflation and interest rates.

The Aussie pair’s latest inaction could be linked to the statements from excerpts of an economic statement to be delivered to parliament Thursday by Aussie Treasurer Jim Chalmers, as reported by Bloomberg, which cuts the nation’s GDP growth outlook. “The economy expanded 3.75% in the 12 months ended June 30, compared with the previous government’s estimate of 4.25% ahead of a May election,” said the news.

Also weighing on the pair could be the intact fears of the US economic slowdown as portrayed by the US Treasury yield curve, as conveyed by Reuters. The analysis mentions that the US government bond market is sending a fresh batch of signals that investors are increasingly convinced the Federal Reserve's aggressive actions to tame inflation will result in recession. “Some of those moves reversed slightly on Wednesday, with rates at the short end of the curve turning lower on expectations of the Fed being less likely to continue with super-sized hikes,” adds Reuters.

It’s worth noting that the US 10-year Treasury yields dropped nearly four basis points (bps) to 2.78% while the 2-year bond coupons slumped by 2.58% to 2.98% after the Fed’s 0.75% rate hike. Even so, the gap between the key US bond coupons remains the widest since 2000 and in turn hints at the US recession woes.

On Wednesday, the US Federal Reserve (Fed) matched market forecasts by announcing a 75-bps rate increase. However, the risk appetite improved after the rate lift as Chairman Powell’s speech spurred speculations that the hawks are running out of fuel. Key comments from the Fed’s Powell were that the rates had reached neutrality, so there won't be any more forward guidance, as well as rates will be decided meeting by meeting. The Fed meeting spurred the market’s risk-on mood, before the latest cautious sentiment and fueled the AUD/USD prices.

Before that, Australia’s downbeat Q2 Consumer Price Index (CPI) and mixed US data joined the pre-Fed anxiety to weigh on the AUD/USD prices. Australia’s headline Consumer Price Index (CPI) matches 1.8% QoQ forecasts, versus 2.1% prior whereas the YoY release eased below 6.2% expectations to 6.1%. On the other hand, US Durable Goods Orders rose by 1.9% MoM versus expectations of -0.4% and the revised prior of 0.8%. Further, the Nondefense Capital Goods Orders excluding Aircraft also increased by 0.5% compared to 0.2% market consensus and 0.6% prior. Additionally, the US Pending Home Sales dropped by 8.6% MoM in June, compared to the market expectation for a decrease of 2% and following May's growth of 0.4%.

Amid these plays, the Wall Street benchmarks rallied post-Fed and closed with gains while the US Treasury yields eased. However, the S&P 500 Futures print mild losses by the press time.

Moving on, Australia’s Q2 Import Price Index and Retail Sales for June may offer immediate directions ahead of the initial readings of the US Q2 Gross Domestic Product (GDP).

Read: US Gross Domestic Product Preview: Would the US avoid a technical recession?

Technical analysis

AUD/USD lands on a bull’s table on marking a successful break of an downward sloping trend line from April 05, near 0.6935 now. Also acting as a short-term key support is the 50-DMA level surrounding 0.6975. With this, the buyers are on their way to the mid-June high near 0.7070 wherein the 0.7000 psychological magnet acts as the immediate hurdle.