AUD/USD hovers above 0.7200 amid mixed catalysts, long day ahead

• AUD/USD struggles to extend corrective pullback from seven-week low.
• Mixed data joins fresh covid woes and cautious sentiment ahead of a busy calendar day to trigger market consolidation.
• Equities dwindle, Treasury yields stay firmer and DXY eases after refreshing 2021 peak.
• RBA’s Bullock precedes multiple US data to offer a busy day, RBNZ rate decision important too.

AUD/USD seesaws around 0.7225, following the bounce off October-start lows, during early Wednesday morning in Asia.

The Aussie pair initially dropped to the multi-day low on increased expectations of a Fed rate hike and mixed data at home before the absence of strong US PMIs triggered consolidation of the latest losses. However, the cautious mood in the market before a long line of data/events challenges the risk barometer pair’s rebound of late.

The Commonwealth Bank of Australia (CBA) released preliminary readings of November’s PMIs. The activity numbers suggest softer Manufacturing PMIs failing to beat the strong Services and Composite PMI figures. Other than the mixed data, comments from Marion Kohler, Head of Domestic Markets at the Reserve Bank of Australia (RBA), also favored the AUD/USD pair’s corrective pullback by citing record low interest rates.

On the other hand, US Markit PMIs also flashed mixed numbers for November as the Manufacturing activity gauge rose past expectations and prior but not the Services index, which in turn weighed on the Composite figures. That said, US Richmond Fed Manufacturing Index crossed the expected figure of 5 but stayed below 12 previous readouts to 11 for November.

With the US activity numbers failing to extend the previous run-up Fed hawks took a breather following a strong push to the yields and US Dollar Index (DXY) after US President Joe Biden nominated Jerome Powell for Federal Reserve (Fed) Chairman and Richard Clarida for Vice-Chair’s post. Also challenging the AUD/USD bears were the covid concerns as the Eurozone flashes red signals while figures at home and in the US back the policymakers’ cautious optimism and rule out the fears of another round of local lockdowns.

Even so, the US Treasury yields ran higher towards the yearly top marked in October, up five basis points (bps) to 1.676%, whereas the Wall Street benchmarks closed mixed. Further, gold prices dropped for the fourth consecutive day to print a fresh three-week low before bouncing off $1,781.

Given the mixed catalysts and the AUD/USD pair’s failures to keep the recovery moves, traders seek more clues, backed by technical validation to extend the latest rebound. Hence, comments from RBA Assistant Governor (Financial System) Michele Bullock will be closely observed for fresh impulse ahead of the monetary policy decision from the Reserve Bank of New Zealand (RBNZ).

Additionally, multiple US data fill the calendar before Thursday’s Thanksgiving Day holiday. Among them, October Durable Goods Orders, the second estimate of the Q3 Gross Domestic Product, the latest FOMC Meeting Minutes and October core PCE inflation are crucial.

Hence, AUD/USD traders stay on the sidelines and await more clues.

Technical analysis

A clear downside break of the three-month-old ascending trend line joins bearish MACD signals to keep AUD/USD bears hopeful despite bouncing off a 78.6% Fibonacci retracement (Fibo.) of November 2020 to February 2021 upside, around 0.7200. That said, October’s low and a yearly support line, respectively near 0.7170 and 0.7140, can challenge the further downside ahead of the 2021 bottom of 0.7105.

Meanwhile, a corrective pullback should not only offer a daily closing beyond the previous support line from August close to 0.7260 but also successfully cross a downward sloping resistance line from November 02, around 0.7295, to convince the bull’s return.