AUD/USD drops back to 0.6400 on downbeat China PMI, focus on RBA, Fed

• AUD/USD remains mildly bid after upbeat China PMIs for October.
• No disappointment from Aussie Retail Sales, mixed sentiment earlier favored bulls.
• RBA versus Fed divergence will be crucial as hawks could dominate on Wednesday’s FOMC while Aussie policymakers may hesitate.

AUD/USD reverses from intraday high with a 15-pip fall to 0.6402 as China’s activity numbers recalled bears after an upbeat start to the key week. The pair’s latest weakness also prints the three-day downtrend by the press time.

China’s official NBS Manufacturing PMI for October dropped to 49.2 versus 50.0 expected and 50.1 prior. Further, the Non-Manufacturing PMI also slumped to 48.7 compared to 51.9 market forecasts and 50.6 previous readings. Earlier in the day, Australia’s Retail Sales for September reprinted the 0.6% figures while matching the market forecasts.

Elsewhere, sluggish Treasury yields join mildly offered US stock futures and the market’s anxiety ahead of this week’s monetary policy meeting of the US Federal Reserve (Fed) and the Reserve Bank of Australia (RBA) to challenge the AUD/USD moves.

Furthermore, covid woes in China escalate as Macau locked down a casino resort. On the same line could be the fears emanating from Russia’s retreat from the grain deal. “Russia, which invaded Ukraine on Feb. 24, halted its role in the Black Sea deal on Saturday for an ‘indefinite term’ because it could say it could not ‘guarantee the safety of civilian ships’ traveling under the pact after an attack on its Black Sea fleet,” reported Reuters.

Amid these plays, the US Treasury yields are directionless after a downbeat weak and the US equity future print mild losses even after Dow Jones braces for the biggest monthly jump since 1976. Further, the US Dollar Index (DXY) prints a three-day uptrend around 110.80, up 0.10% intraday by the press time.

Moving on, the second-tier activity data from the US can entertain AUD/USD traders ahead of the RBA’s verdict, up for release on Tuesday. Should the Aussie central bank surprise markets by announcing a higher-than-expected 0.25% increase in the benchmark rate, the Aussie pair may reverse the latest downtrend.

Technical analysis

Unless breaking the 0.6370-60 support confluence, including the 21-DMA and a two-week-old ascending trend line, the AUD/USD pair may struggle to lure the bears.