AUD/USD buyers approach 0.6800 despite mixed China data, focus on US Retail Sales

• AUD/USD extends corrective pullback from two-year low even as China data came in mixed.
• China Q2 GDP dropped more than expected, Retail Sales rose but Industrial Production ease in June.
• Beijing’s shift towards cordial approach for Australia also underpins recovery moves.
• US Retail Sales, Michigan CSI could entertain traders, G20, Fedspeak will also be important for fresh impulse.

AUD/USD picks up bids to refresh intraday high around 0.6760 despite economic troubles at the biggest customer China. That said, the Aussie pair appears to cheer the risk-on mood during Friday’s Asian session while portraying a corrective pullback from a two-year low.

That said, China’s Q2 Gross Domestic Product (GDP) shrank more than -1.5% expected to -2.6% QoQ, versus 1.4% prior. Further, the Industrial Production also eased but Retail Sales improved in June.

Also read: China’s GDP contracts 2.6% YoY in Q2 2022 vs. -1.5% expected, AUD/USD unfazed

Apart from the data, trade-positive comments from China also favor the AUD/USD prices of late.

Recently, China’s Foreign Minister Wang Yi said that the relations between Beijing and Canberra face challenges and opportunities currently. The diplomat also added, “China is willing to recalibrate relations in a spirit of mutual respect.” It should be noted that rumors surrounding China’s reversing of its unofficial ban on Australian coal imports in August or September favored the Aussie prices earlier in the day.

Above all, receding market fears of the Fed’s 100 bps rate hike joins an easing difference between the US 10-year Treasury yields and its 2-year counterpart to favor the AUD/USD pair’s latest rebound. Beneath the same could be the previous day’s mixed US data and Fed policymakers’ attempt to talk down fears of aggressive actions.

That said, St. Louis Federal Reserve President James Bullard and Federal Reserve Governor Christopher Waller were among the key Fed speakers who tried to talk down the odds of higher rates. That said, Fed’s Bullard said, "So far, we've framed this mostly as 50 versus 75 at this meeting." On the same line, Fed’s Waller mentioned that markets may have gotten ahead of themselves by pricing a 100 basis points rate hike in July, as reported by Reuters. It should be noted that the Fed policymakers head to a blackout period from this weekend ahead of late July Federal Open Market Committee (FOMC).

On the other hand, the US Producer Price Index (PPI) climbed to 11.3% YoY in June from 10.9% in May, versus the market expectation of 10.7%. However, Weekly Jobless Claims were the highest in five months, rising 244K versus 235K prior and market forecasts.

Moving on, US Retail Sales, expected 0.8% MoM in June from -0.3% marked in May, will precede preliminary readings of the Michigan Consumer Sentiment Index (CSI) for July, expected 49.9 versus 50.0 prior, to direct short-term AUD/USD moves. Also important will be the Fedspeak and updates from the meeting of the Group of 20 key nations (G20) in Indonesia.

Technical analysis

Despite the latest rebound, AUD/USD keeps its weekly trading pattern of taking rounds to a downward sloping support line from January 2022 despite marking volatile sessions and refreshing multi-day lows of late. It’s worth noting that the RSI (14) remains mostly stable, above the oversold territory, which in turn allows the bears to keep reins.

That said, the quote’s fresh weakness needs a sustained closing below the stated support line, near 0.6740 by the press time. Alternatively, recovery moves could aim for the 0.6800 threshold before challenging the 0.6855 resistance confluence including the 21-DMA and the aforementioned wedge’s upper line.