AUD/USD eyes weekly gains above 0.6700 ahead of China PMI, Fed’s favorite inflation

• AUD/USD reverses the previous weekly loss, grinds higher of late.
• Firmer sentiment, softer US Dollar allow Aussie bulls to keep the reins.
• Fed policymakers tease further rate hikes but don’t confirm the size of it and allow policy doves to remain hopeful.
• China-linked fears jostle with easing bank turmoil fears to tease buyers ahead of key data.

AUD/USD bulls occupy the driver’s seat while reversing the previous weekly losses around 0.6715 as traders await the key inflation clues from the US on Friday. Adding importance to the day’s Asian session are China’s official Purchasing Managers’ Indexes (PMIs) for March.

Receding fears of the banking crisis join the confusion about the future rate hikes among the key central banks to allow the AUD/USD pair to cheer the risk-on mood. Adding strength to the optimism, as well as the Aussie price are the comments from China suggesting higher growth figures in March that the first two months of the year.

That said, Fed Chair Jerome Powell teased one more rate hike in the current year and the other policymakers followed the suit while highlighting the task of taming inflation. However, the majority of them appeared cautious of not sounding too hawkish and hence raised doubts that the price pressure is easing. Additionally favoring the risk appetite, as well as the AUD/USD price, were comments suggesting the soundness of the banking sector. It should be noted that US Treasury Secretary Janet Yellen said on Thursday, “Banking system is sound, even as it has come under pressure.

Elsewhere, mixed US data, mostly softer, fails to justify the hawkish Fed concerns and allow the Aussie pair to grind higher. On Thursday, final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP), also known as the Real GDP, marked an easy Annualized growth number of 2.6% versus 2.7% previous forecasts. It’s worth noting that the Q4 Personal Consumption Expenditure (PCE) Prices matched 3.7% QoQ forecasts and prior while the Core PCE figure grew to 4.4% QoQ versus 4.3% expected and prior. Moving on, the Weekly Initial Jobless Claims rose to 198K for the week ended on March 25 versus 191K prior and 196K market forecasts. 

Alternatively, China's Taiwan Affairs Office threatened retaliation over Taiwan President Tsai Ing-wen's visit to the US on Wednesday. Additionally, China's Premier Li Qiang recently said that the economic situation in March is even better than in January and February. The policymaker, however, also raised geopolitical tension by opposing trade protectionism and decoupling, which indirectly targets the US.

Amid these plays, Wall Street closed positive but the yields grind higher and weigh on the US Dollar.

Moving on, China NBS PMIs for March will precede the Fed’s favorite inflation gauge to direct AUD/USD moves. Forecasts suggest that China’s headline NBS Manufacturing PMI is expected to ease to 51.5 versus 52.6 prior.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Technical analysis

AUD/USD extends recovery from a three-week-old ascending support line, around 0.6660, towards 200-DMA hurdle surrounding 0.6755.