AUD/USD: Risk-aversion, softer Aussie inflation directs bears to sub-0.6500 zone ahead of US GDP

• AUD/USD remains pressured around intraday low, drops back towards two-year bottom.
• Australia’s first-ever monthly CPI suggests easing inflation pressure.
• Yields pare the biggest daily fall in six months as geopolitical tension remains intact.
• China’s plans to issue government bonds probe sellers, final readings of Q2 US GDP eyed.

AUD/USD pares intraday losses around 0.6490, recently bouncing off daily lows, as traders await fresh clues to defend the latest pullback moves.

That said, downbeat prints of Australia’s monthly Consumer Price Index (CPI) joined the risk-off mood to weigh on the Aussie pair during early Thursday. The same joined firmer US Treasury yields to consolidate the previous day’s rebound from the two-year low.

As per the first monthly CPI data from the Australian Bureau of Statistics (ABS), the headline price pressure eased in August to 6.8% from 7.0% in July. The same joins the Reserve Bank of Australia’s (RBA) recently cautious statements to challenge the AUD/USD buyers after the data release.

Elsewhere, Wednesday’s risk-on mood and China’s efforts to propel the domestic markets in an attempt to overcome slowdown fears seem to favor the recent rebound in the US Treasury yields, as well as the US dollar. On the same line could be the People’s Bank of China’s (PBOC) first increase in the onshore yuan fix in nine days and plans to issue 2.5 trillion yuan in government bonds in Q4.

It should be noted, however, that the markets’ doubts about the Bank of England’s (BOE) capacity to restore the British economic performance while keeping the recently criticized fiscal plan weigh on the sentiment, as well as the AUD/USD prices. Additionally, the hawkish commentary from the global central bankers, including those from Europe and the US, joins the looming energy crisis in Europe and Russia’s hesitance to respect the Western pressure to exert additional downside pressure on the major currency pair.

Amid these plays, the US 10-year Treasury bond yields pare the biggest daily loss in six months and allow the US Dollar Index (DXY) to jump back towards the 20-year high marked the previous day. It’s worth noting that the S&P 500 Futures print mild losses and fades bounce off a 21-month low of late.

Moving on, the final readings of the US Q2 Gross Domestic Product (GDP), expected to confirm -0.6% annualized figure, could entertain AUD/USD traders. However, risk catalysts are more important and hence the Fedspeak, as well as headlines from China may direct short-term pair moves clearly.

Technical analysis

A sustained reversal from a the two-week-old resistance line, near 0.6530 at the latest, redirects AUD/USD towards the 78.6% Fibonacci Expansion (FE) of the AUD/USD pair’s April-August moves, around 0.6355.