AUD/USD retreats from 0.6300 on downbeat Australia Consumer Confidence, mixed mood

• AUD/USD fades bounce off 2.5-year low marked the previous day.
• Australia’s Westpac Consumer Confidence dropped to -0.9% for October.
• Traders turned anxious on return of full markets, ahead of key data/events.
• Geopolitical/recession fears join RBA vs. Fed divergence to keep bears hopeful.

AUD/USD remains depressed around the lowest levels since April 2020 as the recent downbeat Aussie data adds strength to the bearish bias during Tuesday’s sluggish Asian session. Also exerting downside pressure on the quote could be the divergence between the recent monetary policy bias of the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed).

Australia’s Westpac Consumer Confidence dropped to -0.9% for October versus 3.9% prior. In doing so, the private sentiment gauge reversed the first positive in nine months.

The reason for pessimism in the Pacific’s biggest economy could be linked to the slowdown fears surrounding its biggest customer China. Recently, the People’s Bank of China (PBOC) had to intervene in the markets to defend the easy money policy and safeguard the troublesome reality sector to avoid recession. Even so, the dragon nation’s zero covid policy weighs takes a toll on the economic activities of China, as signaled by the latest PMIs from the nation.

Elsewhere, escalating Russian shelling on Kyiv exerts additional downside pressure on the quote due to its risk barometer status. Further, the hawkish Fedspeak adds strength to the bearish bias. “US can lower inflation relatively quickly without recession or large increase in unemployment,” said Chicago Fed President Charles Evans on Monday. The policymaker also added that the Fed needs to "carefully and judiciously" navigate to a "reasonably restrictive" policy rate. It should be noted that Federal Reserve Vice Chair Lael Brainard made the case for cautious rate hikes for the future, per the Wall Street Journal (WSJ).

Above all, the RBA’s dovish rate hike and the increasing hawkish Fed bets appear the key bearish catalyst for the AUD/USD prices.

That said, the recent jump in the US Treasury yields and the fears of global recession highlights the upcoming Fed Minutes and the US Consumer Price Index (CPI), up for publishing on Wednesday and Thursday, for fresh impulse.

Technical analysis

A sustained downside break of the three-month-old support line, now resistance around 0.6310, directs AUD/USD bears towards March 2020 high near 0.6215.