AUD/USD jostles with 0.6500 hurdle on mixed China PMI data, US inflation eyed

• AUD/USD stays defensive around yearly low after September’s activity data from the key customer.
• China’s NBS Manufacturing PMI rose more than expected to 50.1, Non-Manufacturing PMI and Caixin Manufacturing PMI eased.
• Market sentiment remains sluggish as traders await important statistics.
• Risk-aversion, likely stronger US inflation can please bears.

AUD/USD remains sidelined around 0.6500 as it pokes the resistance line of a bullish wedge during Friday’s Asian session. Even so, the quote remains on the way to printing the third weekly loss, as well as the biggest monthly downside in three. That said, the Aussie pair recently struggled amid mixed activity data for September from Australia’s biggest customer China.

That said, China’s official NBS Manufacturing PMI rose to 50.1 versus 49.6 expected and 49.4 prior while the Non-Manufacturing PMI declined to 50.6 compared to 52.0 market forecasts and 52.6 prior readings. Further, China's Caixin Manufacturing PMI dropped to 48.1 during the stated month versus 49.5 expected and prior.

Also read: Chinese Manufacturing PMI beats and supports AUD on the margin, services fall

Other than the mixed data at home, fears of global recession and recently softer Aussie inflation data also challenge the AUD/USD buyers. “Investors added another cycle of selling after Fed officials gave no indication about the U.S central bank changing its view on rate hikes, leaving investors skittish about a potential recession in the country,” said Reuters.

On Thursday, the first monthly CPI data from the Australian Bureau of Statistics (ABS) mentioned the headline price pressure eased in August to 6.8% from 7.0% in July.

Earlier in the day, a Reuters poll suggested that the Reserve Bank of Australia (RBA) is likely to hike its interest rate by another 50 basis points in October in its most aggressive tightening cycle since 1990s to curb red-hot inflation.

It should be noted that the softer US inflation expectations might have favored the AUD/USD buyers the previous day. That said, the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since early 2021.

Having witnessed the dismal reaction to China PMIs, AUD/USD traders may await the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for August, expected 4.7% YoY versus 4.6% prior. Should the US inflation gauge print upbeat numbers, the AUD/USD prices may witness further downside.

Technical analysis

Successful trading above 0.6500 could help AUD/USD to pare weekly loss as it will confirm the three-week-old falling wedge bullish chart pattern. Meanwhile, 0.6440 and the latest multi-month low near 0.6365 might return to the seller’s radar in case of a fresh downside. That said, MACD and RSI (14) join the downbeat fundamentals to challenge the bulls.