AUD/USD struggles above 0.7000 as traders await Aussie Wage Price Index, FOMC Minutes

• AUD/USD fades bounce off one-week low, stays sidelined of late.
• Fears emanating from China, mixed message from RBA Minutes challenge buyers.
• US dollar pullback, firmer equities restrict immediate downside ahead of the key Aussie data.
• RBA emphasizes firmer wage growth, Fed Minutes eyed for stronger rate hikes.

AUD/USD portrays the market’s anxiety as it seesaws around 0.7020 ahead of the key Australia wage price data and the Federal Open Market Committee (FOMC) meeting minutes on early Wednesday in Asia. That said, the risk barometer pair dropped during the last two days amid recession and geopolitical fears before bouncing off a one-week low in late Tuesday.

Pessimism surrounding Australia’s major customer China and the Reserve Bank of Australia’s (RBA) cautious remarks over the next rate hike move appeared to have exerted major downside pressure on the AUD/USD prices of late.

On Tuesday, the RBA Minutes mentioned that the board expects to take further steps in the process of normalizing monetary conditions over the months ahead, but it is not on a pre-set path, per Reuters. On the other hand, China’s state planner announced multiple measures to fight back the recession woes after downbeat data and the failure of the People’s Bank of China’s (PBOC) rate cut in impressing traders. Also, Washington Post (WaPo) mentioned that Chinese authorities ordered factories to suspend production in several major manufacturing regions to preserve electricity, as the country face the worst heat wave in six decades.

Talking about data, US Industrial Production grew 0.6% in July versus 0.3% expected and upwardly revised 0.0% prior whereas Building Permits also increased to 1.674M MoM during the stated month versus 1.656 market expectations and 1.696M previous readings. It should be noted that the Housing Starts dropped to 1.446M from 1.599M prior and 1.54M expected.

Against this backdrop, Wall Street managed to close on the positive side, despite retreating by the end of the day. That said, the US 10-year Treasury yields snapped a two-day downtrend by regaining 2.80% at the latest.

Moving on, Australia’s second quarter (Q2) Wage Price Index, expected at 0.8% QoQ versus 0.7% prior, will be important for immediate AUD/USD moves as RBA emphasizes more on the wage data and inflation. Following that, the Fed Minutes will be crucial for clear directions as traders doubt a 0.75% rate hike in September after the latest easing in inflation.

Technical analysis

A four-month-old previous resistance line restricts immediate AUD/USD downside to around 0.6990. The recovery moves, however, need validation from the 200-DMA hurdle surrounding 0.7120. That said, the RSI (14) favors the quote’s further upside as the oscillator backs the higher low on prices with a higher low on the histogram.