AUD/USD defends 0.7100 on downbeat yields, mixed Aussie trade data

• AUD/USD stays mildly bid, consolidates recent losses around yearly low.
• Australia Trade Balance, Exports improve in October but Imports contract further.
• Market sentiment dwindles as mixed Fed signals confront Omicron woes ahead of pre-Fed trading lull.
• US Weekly Jobless Claims, virus updates can entertain intraday traders.

AUD/USD prints mild gains around 0.7110, snapping a six-day downtrend near 2021 bottom during Thursday’s Asian session. The Aussie pair’s latest consolidation could be linked to the softer Treasury yields and mixed trade numbers from home.

Australia Trade Balance grew past 11000M forecast to 11220M in October, versus 12243M prior. The details suggest that the Imports shrank more than -2.0% previous release to -3.0% whereas Exports improved to -3.0% from -6.0% prior. Additionally, Home Loans dropped below -1.0% market consensus and -2.7% previous reading to -4.1% whereas Investment Lending for Homes eased to 1.1% versus 1.4% printed the last.

Read: Aussie Trade Balance Oct: A$11.22B vs est A$11.150B; Aussie firm

Following the data, AUD/USD prices remain mildly bid around the intraday high as traders await Friday’s US Nonfarm Payrolls (NFP) after recently mixed signals from the Fed Chair Jerome Powell weighed down the Treasury yields.

That said, the US 10-year Treasury yields stay pressured near a two-month low surrounding 1.40% by the press time whereas the S&P 500 Futures print 0.40% intraday gains after the Wall Street benchmarks marked second consecutive daily loss.

Federal Reserve (Fed) Chairman Jerome Powell reiterated his inflation fears but also said he still believes inflation will come down “meaningfully” in the second half of 2022, during testimony against a Senate Commission. On the contrary, Federal Reserve Bank of New York President John C. Williams said, per New York Times, that Omicron could prolong supply and demand mismatches, causing some inflation pressures to last.

The virus woes recently spread into the US after the first Omicron case pushed President Joe Biden’s administration to extend the rules for wearing a mask in public transit. “US President Joe Biden's administration will extend requirements for travelers to wear masks on airplanes, trains and buses and at airports and train stations through mid-March to address ongoing COVID-19 risks,” said Reuters quoting anonymous sources.

Given the mixed concerns over inflation and a 10-week low of the US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, risk appetite is likely to rely on the virus update for fresh impulse. However, the AUD/USD prices are expected to portray a sluggish move amid a lack of major data and the generally observed pre-NFP trading lull.

Read: US nonfarm payrolls take center stage after Powell’s hawkishness

Technical analysis

AUD/USD remains bearish until defying a downward sloping trend channel from late October, between 0.7190 and 0.7075 at the latest. Adding to the upside filter is the 50-SMA and 23.6% Fibonacci retracement (Fibo.) of late October to November downside, around 0.7175-80.