AUD/USD sellers poke 0.6900 as sentiment sours ahead of US PMIs, Fed

• AUD/USD refreshes intraday low, pares the biggest weekly gains in two months.
• Sluggish yields, hopes of Fed’s aggression favor DXY to consolidate the first weekly loss in four.
• Preliminary readings of the US PMIs for July will decorate calendar.

AUD/USD bears flirt with daily lows near 0.6900 amid a downbeat market mood heading into Friday’s European session. The Aussie pair’s weakness could also be linked to the downbeat PMI data at home and the US dollar’s consolidation of the first weekly loss in four.

The US Dollar Index (DXY) picks up bids to refresh its intraday high around 106.95, up 0.35% on a day, as sour sentiment joins sluggish yields to help the greenback pare latest losses. Even so, the DXY braces for the first weekly loss in four while extending the July 14 reversal from a nearly two-decade high. The greenback’s previous weakness could be linked to the US Treasury yields as the benchmark 10-year bond coupons marked the biggest daily slump since mid-June on Thursday, as well as eyes the second consecutive weekly loss.

The recent risk-aversion appears to take clues from cautious sentiment ahead of the preliminary US S&P Global PMIs for July, as well as the next week’s Federal Open Market Committee (FOMC). Furthermore, Hong Kong’s market intervention and fears of economic slowdown in China’s 2022 GDP growth, as signaled by the Asian Development Bank (ADB), also exert downside pressure on the AUD/USD prices, due to its trade links with Beijing.

Earlier in the day, Australia’s S&P Global Manufacturing PMI eased to 55.7 in July versus 56.2 prior and 56.4 expected. Further, the S&P Global Services PMI dropped to 50.4 during the stated month compared to 55.0 market consensus and 52.6 prior. Further, the S&P Global Composite PMI also declined to 50.6 versus 52.6 in previous readouts.

Amid these plays, Wall Street benchmarks closed firmer and the US Treasury 10-year Treasury yields marked the biggest daily slump in five weeks, down one basis point (bps) to 2.90% at the latest. That said, S&P 500 Futures drops 0.45% by the press time.

Looking forward, AUD/USD traders are likely to focus on the next week’s Fed meeting, especially after the European Central Bank’s (ECB) 0.50% rate hike. That said, today’s US PMI should print firmer numbers to recall the US dollar bulls.

Forecasts suggest that the US S&P Global Manufacturing PMI is expected to decline to 52.0 from 52.7 whereas its Services counterpart could ease to 52.6 from 52.7. With this, the Composite PMI may drop to 51.7 from 52.3 prior.

Technical analysis

AUD/USD sellers attack the weekly support line, at 0.6890 by the press time, a break of which could direct the quote towards May’s low near 0.6830. Alternatively, the 50-DMA hurdle surrounding 0.6975 appears an important resistance to watch for bulls during the Aussie pair’s further advances.