AUD/USD renews intraday high around 0.7000 on RBA Minutes, US Retail Sales, Fed’s Powell eyed

• AUD/USD ticks high after the RBA Minutes signaled policymakers discussed 40 bps rate increase in the latest meeting.
• Market sentiment improves on China headlines, optimism ahead of US data, Fed’s Powell.
• Upbeat US data, Powell’s refrain from 50 bps rate hike could renew US dollar strength.

AUD/USD bulls attack 0.7000 threshold during three-day rebound from a two-year low buyers cheer upbeat statements from the RBA’s latest monetary policy meeting minutes.  Also favoring the risk barometer pair is the upbeat mood, mainly due to headlines from China. However, the traders remain cautious with eyes on the US Retail Sales for April and a speech from Fed Chair Jerome Powell.

As per the Minutes of the latest monetary policy meeting by the Reserve Bank of Australia (RBA), “Given the upside risks to inflation and the current extremely low level of interest rates, an argument for a 40 basis point increase could be made.”

Other than the RBA Minutes, the risk-on mood also underpins the AUD/USD pair’s latest run-up. The recovery in the market sentiment could be linked to headlines from China, as well as recently downbeat US data and Fedspeak.

Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area.

On the other hand, the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue.

Also acting as a negative catalyst for the USD, as well as favoring the AUD/USD prices, is the news suggesting the US extend covid public health emergency beyond July.

Against this backdrop, the US 10-year Treasury yields added two bps to 2.9% whereas the S&P 500 Futures rose 0.20% at the latest. It’s worth noting that the US Dollar Index (DXY) remains pressured around 104.20, after printing a two-day pullback from a 20-year high.

Moving on, AUD/USD traders will keep their eyes on the risk catalysts, comprising the covid and geopolitical headlines, for immediate directions. However, the US Retail Sales for April, expected at 0.7% versus 0.5% prior, as well as Fed Chair Powell’s speech at the Wall Street Journal’s (WSJ) event, will be more important for clear directions.

Technical analysis

Lows marked during late 2021 and earlier in the month, respectively around 0.6995 and 0.7030, challenge the additional upside of the AUD/USD pair’s recovery moves. Alternatively, a downward sloping trend line from August 2020, near 0.6820, challenges the pair’s downside moves.