AUD/USD remains firmer past 0.6800 amid cautious optimism, RBA/Fed chatters in focus

• AUD/USD picks up bids to stay upbeat during the second positive day after renewing a two-year low.
• Easing fears of hawkish Fed rate hikes, absence of Fedspeak join optimism surrounding China to favor buyers.
• RBA Minutes, Deputy Governor Bullock’s comments will be important for fresh impulse.

AUD/USD remains firmer for the second consecutive day as bulls flirt with the 0.6800 threshold, up 0.20% intraday around 0.6810 during Monday’s Asian session. In doing so, the Aussie pair takes clues from the softer US dollar, as well as mildly positive sentiment in the market, to keep buyers hopeful ahead of a busy week.

That said, the US Dollar Index (DXY) stretches Friday’s losses to 107.75, down 0.22% intraday, as traders curtail hawkish calls over the Fed’s next move. That said, mostly downbeat US data and mixed Fedspeak appeared to have cut the hawkish Fed bets of late.

US Retail Sales for June grew 1.0% MoM versus 0.8% expected and -0.1% prior (revised from -0.3%) whereas the University of Michigan's Consumer Confidence Index edged higher to 51.5 in July's flash estimate, versus 49.9 expected and 50.0 prior. However, the Index of Consumer Expectations declined to its lowest level since May 1980 at 47.3. Further, the US Industrial Production also contracted by 0.2% MoM in June while the New York Empire State Manufacturing Index rose to 11.1 versus -2.0 expected and -1.2 prior.

In addition to the mixed data, Fedspeak also retreat from the previous calls of 75 bps rate hike and triggered the AUD/USD pair’s recovery. Atlanta Fed President Raphael Bostic said on Friday that June's 75 basis points rate hike was a "big move" and added that the Fed wants policy transition to be orderly, as reported by Reuters. On the other hand, San Francisco Fed President Mary Daly said on Friday that the "Fed is working on getting down inflation without stalling economy." Further, St. Louis Federal Reserve Bank President James Bullard sounded neutral as he said, per Reuters, on Friday that it wouldn't make too much of a difference to do a 100 basis points (bps) or a 75 bps rate hike at the next meeting.

Furthermore, the Fed’s blackout period ahead of late July’s FOMC and China’s readiness for more stimulus, as well as hawkish hopes from the European Central Bank (ECB) add strength to the AUD/USD upside.

Against this backdrop, Wall Street closed higher and the US Treasury yields ended the week on a negative note. However, the S&P 500 Futures remain firmer around 3,870 while the US 10-year Treasury yields drop 1.1 basis points (bps) to 2.91% at the latest.

Looking forward, risk catalysts could entertain AUD/USD traders amid a light calendar at home. However, Tuesday’s Minutes Statement from the Reserve Bank of Australia (RBA), as well as comments from RBA Deputy Governor Guy Bullock, will be important for the pair traders to watch.

Technical analysis

A daily closing beyond the convergence of a monthly resistance line and the 21-DMA, around 0.6855 by the press time, appears necessary for the AUD/USD bulls to retake control. Until then, bears can keep their eyes on the 0.6700 threshold.