AUD/USD fades bounce off key support below 0.7300 amid quiet session

• AUD/USD struggles around monthly low after snapping two-day downtrend.
• Cautious optimism prevails amid light calendar, lack of major events.
• Stock futures print mild gains but Treasury yields dwindle as US inflation expectations jump back.
• Fespeak, inflation talks and Evergrande updates will be the key to watch for fresh impulse.

AUD/USD treads water around 0.7275 amid a lack of major catalysts during Friday’s Asian session. That said, the quote bounced off a 1.5-month-old support line the previous day but struggles for fresh clues of late.

A two-day fall in the US inflation expectations joined slightly hawkish rhetoric from the Fed policymakers to underpin the fall of the US Treasury yields and the US Dollar Index (DXY). However, the latest rebound in the US inflation gauge, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, seems to have challenged the AUD/USD buyers amid a light calendar.

It should be noted that Thursday’s grim concerns over China’s Evergrande, on the troubled real-estate player’s sell of entire stake in HengTen Networks Group Ltd at a hefty loss, probed the AUD/USD bulls. Though, the latest comments from CEO of the CBB International, which is a New-York-based research group putting a private survey called the China Beige Book highlight that Evergrande risks will be contained.

Also on the positive side were chatters surrounding the US stimulus as Axios said, “The Congressional Budget Office found that the social spending bill Democrats are racing to pass would increase the federal deficit slightly, but likely not enough to sink its chances in the House.”

Elsewhere, NY Fed President and FOMC Vice-Chair John Williams highlighted inflation fears and pushed for rate action but mixed comments from Chicago Fed President Charles Evans poured cold water on the face of policy hawks. Further, firmer prints of the Philadelphia Fed Manufacturing Survey for November, 39 versus 24 expected, as well as softer-than-previous US Initial Jobless Claims of 268, add to the market’s confusion.

Amid these plays, S&P 500 Futures print mild gains whereas the US Dollar Index (DXY) and US 10-year Treasury yields remain mostly unchanged, around 95.55 and 1.589% respectively by the press time.

Moving on, a lack of major data and events will challenge the AUD/USD momentum traders but the latest uptick in the US inflation expectations may probe the bulls. On the contrary, RBA rate hike expectations have firmed up again, which in turn may keep buyers hopeful.

Technical analysis

AUD/USD struggles to carry the previous day’s gains following its bounce off a six-week-old support line, near 0.7250 at the latest.

In doing so, the quote struggles below important upside hurdles, namely a descending trend line from November 04 around 0.7345 and a convergence of the 100-DMA and 50-DMA close to 0.7355-60.

Given the quote’s failures to hold the rebound, as well as downbeat MACD and RSI signals, the AUD/USD prices are likely to challenge the stated support line near 0.7250, a break of which will highlight. 0.7220 level, comprising multiple lows marked since August 27. Should the quote remain bearish past 0.7220, September’s low of 0.7169 will be in focus.