AUD/USD battles key hurdle to 0.7100 at fortnight high, focus on PBOC

• AUD/USD grinds higher around two-week top as 21-DMA, descending trend line from early April challenge bulls.
• Softer USD, upbeat headlines from China underpinned the biggest daily gains in a week.
• Aussie jobs report failed to impress traders due to mixed prints, US data were down too.
• Risk catalysts, PBOC announcements to direct short-term moves.

AUD/USD struggles for clear directions around mid-0.7000s, after refreshing a two-week high the previous day. That said, the Aussie pair pares the biggest daily gains in a week inside a 30-pip trading range, holding lower grounds near 0.7250 by the press time of Friday’s initial Asian session.

Alike other Antipodeans, AUD/USD also cheered softer US Treasury yields and the US dollar moves to print a stellar run-up the previous day. The upside momentum also gained due to improvement in China’s covid conditions and softer US data while paying a little heed to the mixed Aussie jobs report.

The US 10-year Treasury yields are likely bracing for the second weekly losses, down 1.8 basis points (bps) to 2.837% at the latest, as traders seem to have tired of the repeated Fedspeak and softer US data. The same weighed on the US Dollar Index eyes the first weekly loss in seven.

On Thursday, Kansas City Fed President and FOMC member Ester George said she is comfortable now doing half-point rate increases. However, Federal Reserve Bank of Minneapolis President Neel Kashkari mentioned the need for the Fed to be aggressive.

Also weighing on the greenback are recently downbeat US data. The latest print of the Federal Reserve Bank of Philadelphia’s Manufacturing Activity Index for May dropped to the lowest reading since May 2020, to 2.6 from 17.6 in April. Further, the Initial Jobless Claims in the week ending on 14 May rose to 218,000, the highest level since January, from 197,000 one week ago and expected a rise of 200,000.

At home, Australia’s downbeat Employment Change and Participation Rate supersede the charm of the record low Unemployment Rate.

While portraying the mood, Wall Street closed mixed and the yields were softer, taking down the USD with them, whereas the S&P 500 Futures print mild gains by the press time.

Given the lack of major data/events on the calendar, AUD/USD prices may rely on the risk catalysts for immediate moves. Also important for the Aussie pair is the People’s Bank of China’s (PBOC) Interest Rate Decision. The PBOC isn’t expected to unveil any changes to the benchmark rate as it kept the 1-year Medium-Term Lending Facility (MLF) interest rate unchanged at 2.85% earlier in the week. Should China surprise markets, the Aussie moves are bound to be witnessed due to the trade links with the dragon nation.

Technical analysis

Given the firmer RSI conditions backing the AUD/USD pair’s battle with the confluence of 21-DMA and a seven-week-old resistance line, around 0.7050, the quote is likely to overcome the immediate hurdle targeting the 0.7100 threshold. However, March’s low near 0.7165 and the monthly peak surrounding 0.7265 will challenge the pair buyers afterward.

On the contrary, pullback moves remain elusive above January’s low near 0.6965.