AUD/USD rebound fades below 0.6900 on softer Aussie PMIs

• AUD/USD retreats from intraday high on downbeat flash PMIs for Australia.
• Australia’s preliminary S&P Global PMIs for August arrived softer than expected and prior releases.
• Recession fears underpin the US dollar’s demand ahead of Friday’s key Jackson Hole speech from Fed Chair Powell.
• US activity and housing numbers could entertain the intraday traders, risk catalysts are the key.

AUD/USD struggles to recover from the 12-day low marked the previous day as downbeat activity data from Australia challenge the pair buyers around 0.6880 during Tuesday’s Asian session. While the S&P Global PMIs are the latest challenge for the Aussie pair, recession fears and hopes of the Fed’s aggression, not to forget talks surrounding China’s worries, appear bigger challenges for the quote.

The preliminary readings of Australia’s S&P Global PMIs for August are all down from the previous releases and market consensus. The headline Manufacturing PMI dropped to 54.5 versus 57.3 expected and 55.7 prior whereas the Services PMI fell into the contraction region with 49.6 figures compared to 54 market expectations and 50.9 previous readings. Further, the Composite PMI also marked a contraction in activities to 49.8 versus 51.1 prior.

Elsewhere, S&P 500 Futures print mild gains as traders lick their wounds after Wall Street saw the red and the yields rose to the fresh monthly high.

The latest corrective pullback in the AUD/USD prices could also be linked to the hopes of more rate cuts from the People’s Bank of China (PBOC) as Chinese media signals more such moves.  China's Securities Times reported that the PBOC may reduce RRR this year to compensate for medium-term lending facility (MLF) maturity. The article states that reserve requirement ratio (RRR) cuts may lower lending prime rates. It is with noting that this is a state-run agency reporting such opinions.

On the other hand, hawkish Fed bets increased after firmer US data, which in turn drowned the AUD/USD prices the previous day. On the other hand, Chicago Fed National Activity Index improved to 0.27 in July, from a downwardly revised -0.25 prior. “Fed funds futures on Monday have priced in a 54.5% chance of a 50 basis-point (bp) rate hike at the Fed's policy meeting next month. The fed funds rate is seen hitting roughly 3.6% by the end of the year, with a peak rate of nearly 3.8% in March 2023,” mentioned Reuters.

Looking forward, preliminary readings of the US PMIs for August will join the US New Home Sales for July and Richmond Fed Manufacturing Index for August to decorate the calendar. Given the recession fears, the AUD/USD prices are likely to remain pressured ahead of the key Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, up for publishing on Friday.

Technical analysis

61.8% Fibonacci retracement of July-August upside, around 0.6850, challenges short-term AUD/USD sellers. However, the recovery moves need validation from the one-week-old descending trend line and 200-SMA, respectively around 0.6910 and 0.6920, to convince the bulls.