AUD/USD retreats from 0.6700 on downbeat Australia Q3 GDP, focus on China trade data

• AUD/USD eases from intraday high amid softer-than-expected Australia Q3 GDP.
• Market sentiment remains cautiously optimistic as China signals easing of Zero-Covid policy as soon as Wednesday.
• Declines in the US inflation expectations and softer US data add strength to the risk-on mood but light calendar probes traders.
• China’s trade numbers for November can offer immediate directions, risk catalysts are the key.

AUD/USD justifies the weaker-than-expected Australian Gross Domestic Product (GDP) data as it retreats from intraday high surrounding 0.6700 after the data release during early Wednesday. In doing so, the Aussie pair struggles to justify the market’s cautious optimism, mainly backed by catalysts surrounding China and the Federal Reserve (Fed).

That said, Australia’s third quarter (Q3) GDP eased to 0.6% QoQ versus 0.7% expected and 0.9% prior while the YoY readings also dropped to 5.9% compared to 6.3% market forecasts and 3.6% previous reading.

Also read: Aussie GDP misses the mark and slightly weighs on AUD

Earlier in the day, Australia’s AiG Performance of Services Index for November declined to 45.6 versus 47.7 prior.

It’s worth noting that the downbeat Aussie data justify the Reserve Bank of Australia’s (RBA) resistance in cutting the benchmark interest rates, despite showing readiness for the same.

On the positive side, China state media renews the market’s optimism by showing the dragon nation’s readiness to ease the three-year-old Zero-Covid policy. "Beijing readies itself for life again," read a headline in the government-owned China Daily newspaper, adding that people were "gradually embracing" newfound freedoms, reported Reuters.

Additionally, downbeats prints of the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, also allow the AUD/USD bulls to keep the reins.

While portraying the mood, the S&P 500 Futures seesaw near 3,950, mildly bid of late, whereas the US 10-year Treasury yields cling to 3.54% mark after the previous day’s downbeat performances of Wall Street and the key Treasury bonds.

That said, the AUD/USD pair traders may now await China’s November month trade balance, expected to deteriorate to $78.1B versus $85.15B prior, for fresh impulse. It’s worth noting that the risk catalysts, like headlines surrounding China’s Covid conditions and geopolitical fears emanating from Russia, Europe and Beijing, should be watched carefully for clear directions.

Technical analysis

AUD/USD rebound remains elusive unless crossing the 61.8% Fibonacci retracement level of the June-October downside, near 0.6855. That said, bearish MACD and multiple attempts to conquer the 100-DMA, around 0.6690 by the press time, keeps the pair sellers hopeful.