AUD/USD pares the biggest daily gains in three weeks near 0.7000, Aussie data, US inflation eyed

• AUD/USD grinds higher after the heavy gains amid a lack of major catalysts.
• China trade data, market’s preparations for US CPI appeared to have favored buyers.
• Mixed equities probed upside momentum, yields underpinned the US dollar pullback.
• Australia’s NAB data for July, second-tier US job numbers may entertain intraday traders, Taiwan headlines are important too.

AUD/USD bulls take a breather after the biggest daily jump in three weeks, taking rounds to 0.6880-90 amid the initial hour of Tuesday’s Asian session. In doing so, the Aussie pair cheered the US dollar’s pullback, as well as firmer China data, before portraying a cautious mood ahead of sentiment data from the National Australia Bank (NAB) and the key US Consumer Price Index 9CPI) for July.

The Aussie pair began the week on the front foot as the US Dollar Index (DXY) traced Treasury yields to consolidate the latest gains. That said, the DXY registered a 0.19% daily loss to 106.37 by the end of Monday whereas the US 10-year Treasury yields dropped nearly seven basis points (bps) to 2.75% at the latest, following a 14-bps run-up on Friday.

Also helping the AUD/USD bulls were firmer prints of China’s trade numbers for July. The headline Trade Balance rose to $101.26B versus $90B forecasts and $97.94B. Further details suggest that Exports increased by 18% compared to 15% expected and 17.9% prior whereas the Imports eased to 2.3% compared to 3.7% expected and 1.0% prior.

It’s worth noting, however, that the hawkish Fedspeak and anxiety ahead of the US inflation data capped the AUD/USD prices. The Fed policymakers welcomed Friday’s strong US jobs report while supporting the aggressive rate hikes.

On Friday, the headline Nonfarm Payrolls (NFP) rose to 528K versus 250K expected and 398K upwardly revised prior. Further, the Unemployment Rate also inched lower to 3.5% compared to 3.6% expected and previous readings. Following the data, San Francisco Fed President Mary Daly said during the weekend that the Fed is far from done in combating inflation. The policymaker also added, “50 bps increase is definitely in play. We need to keep an open mind.” On the same line was Fed Governor Michelle Bowman who said, “Fed should consider more 75 basis-point interest rate hikes at coming meetings in order to bring high inflation back down to the central bank's goal.”

Moving on, NAB Business Confidence and NAB Business Conditions for July, expected 15 and 7 versus 13 and 1 in that order, will direct short-term moves of the AUD/USD ahead of the US Nonfarm Productivity and Unit Labor Costs for the second quarter (Q2). Forecasts suggest that the US Nonfarm Productivity coooulddd improve to -4.6% from -7.3% prior while Unit Labor Costs may ease to 9.5% versus 12.6% previous readings. Other than that, headlines surrounding Taiwan and Russia will also be important for clear directions.

Technical analysis

AUD/USD remains firmer above the 50-DMA support of 0.6880 but the upside momentum needs validation from a downward sloping resistance line from mid-June, close to 0.7025 by the press time.