AUD/USD struggles to defend 0.6700 amid upbeat China data, focus on Michigan CSI, Fed

• AUD/USD keeps early Asian session rebound amid upbeat data from Australia’s biggest customer.
• China’s Industrial Production, Retail Sales flashed firmer data for August.
• RBA’s Lowe defends recent rate hikes, praises economic conditions while favoring slower rate hike at some point.
• Risk catalysts, second-tier US will be important ahead of the key FOMC.

AUD/USD treads water around the 0.6700 threshold as mixed catalysts test the bears around the yearly low during Friday’s Asian session. The Aussie pair’s latest hesitance to welcome sellers could be linked to China data.

That said, China’s Industrial Production rose 4.2% YoY versus 3.8% expected and prior while Retail Sales rose past 3.5% market expectations and 2.7% prior to 5.4%. Further, Reuters said, “China's new home prices fell in August at the fastest pace since November 2021 as its property sector was plagued by weak demand, a mortgage boycott and strict COVID-19 restrictions.”

Also read: China’s August Retail Sales and Industrial Output surprise positively

Earlier in the day, Reserve Bank of Australia (RBA) Governor Philip Lowe crossed wires, via Reuters, as he presented a Testimony in front of the Aussie parliament. In doing so, RBA’s Lowe tried defending the aggressive rate hikes while saying, “Now that inflation is as high as it is, we need to make sure that inflation returns to target in a reasonable time.” The policymaker also stated that Australia in much better position than Fed because wages still contained.

Following the update, Bloomberg said, “Australia’s central bank chief Philip Lowe said the case for outsized interest-rate increases has “diminished” now that the cash rate is approaching “more normal settings,” suggesting smaller moves ahead.”

Although the aforementioned catalysts challenge the AUD/USD pair’s downside moves, the bears keep reins amid hawkish Fed bets and firmer US data, not to forget upbeat yields. That said, the latest readings of the hawkish Fed bets from the CME’s FedWatch Tool suggest the market priced in the Fed’s 0.75% and 1.0% rate hikes during the next week’s FOMC with 77% and 23% chances.

Amid these plays, S&P 500 Futures drop 0.65% intraday by the press time, poking the one-week low around 3,990 while the US 10-year Treasury yields dropped 1.7 basis points to 3.442% after rising 1.38% the previous day.

Moving on, preliminary readings of the Michigan Consumer Sentiment Index (CSI), expected 60 versus 58.2 prior, will be crucial for intraday directions. However, major attention will be on the next week’s Fed meeting. Also important to watch will be the chatters surrounding China and Europe.

Technical analysis

AUD/USD buyers need a clear upside break of May’s low near 0.6830 to lure short-term buyers. However, a four-month-old bearish channel between 0.7060 and 0.6535 could keep the pair sellers hopeful.