AUD/USD struggles below 0.6900 as early Asian optimism dwindles, US data eyed

• AUD/USD fades recovery moves from two-year low, retreats from daily high amid mixed clues.
• China pushes for more employment to college students, sees improvement in covid conditions looking forward.
• Aussie Defense Minister warns China over intelligence ship moving in Aussie waters.
• US yields, stock futures stay firmer but DXY bounces off daily lows ahead of Michigan Consumer Sentiment Index for May.

AUD/USD grinds higher around 0.6890 while struggling to keep the early Asian session rebound from a 23-month low as traders in Brussels await Friday’s bell. That said, the Aussie pair’s latest pullback could be linked to the US dollar’s bounce off intraday low, as well as headlines from Australia and China.

The US Dollar Index (DXY) seesaws around daily bottom near 104.60 amid a pause in the US Treasury yields and stock futures, following the initial run-up. The greenback’s latest moves could be linked to the market’s anxiety ahead of the preliminary readings of US Michigan Consumer Sentiment data for May, expected 64 versus 65.2 prior.

Read: Michigan Consumer Sentiment Index May Preview: Can Americans keep their spending habits?

It’s worth noting that China’s push for more employment generation to the college students and hopes of reaching covid-zero conditions in Shanghai after mid-May previously favored AUD/USD bulls. On the same line was a three-day “at home” stay for residents for covid testing to tame and confirm the covid resurgence in Beijing. However, chatters surrounding Taiwan and the latest warning from Aussie Defense Minister trim the optimism in Asia.

The DXY’s rebound could also be linked to the delay in the Ukraine aid package by the US, due to Senator Rand Paul’s objection. Furthermore, fresh fears that inflation will remain the key threat to the global economy add strength to the USD’s safe-haven demand.

However, cautious comments from Fed Chairman Jerome Powell and San Francisco Fed President Mary Daly join the pre-data anxiety to keep the US dollar under pressure, helping the AUD/USD buyers.

While portraying the mood, the US 10-year Treasury yields portray a corrective pullback after refreshing a two-week low the previous day, around 2.89% by the press time, whereas the S&P 500 Futures print rises 1.0% while licking its wound near one-year low.

Moving on, US data and risk catalysts, mainly relating to China and Russia, will be crucial for AUD/USD traders to watch.

Technical analysis

A downward sloping trend line from December 2021, around 0.6910 guards the immediate recovery of the AUD/USD prices. Failures to break the same won’t hesitate to direct bears towards 50% Fibonacci retracement (Fibo.) of March 2020 to February 2021upside, around 0.6760.