AUD/USD pierces 0.6500 hurdle ahead of China PMIs, US PCE Inflation

• AUD/USD picks up bids to cross the resistance line of a falling wedge bullish formation.
• US dollar pullback trimmed losses even as risk-aversion, downbeat equities weighed on prices.
• Softer Aussie inflation, geopolitical fears and hawkish Fedspeak keep bears hopeful.
• China’s PMI could please bears on downbeat outcome as recession woes intensify.

AUD/USD struggles to justify the market’s risk-off mood as it renews its intraday high around 0.6515, after reversing most of the previous day’s losses amid the US dollar’s pullback. The risk-barometer pair, however, stayed on the bear’s radar as fears emanating from China, Russia and the UK joined downbeat equities and softer inflation numbers at home.

US Dollar Index (DXY) marked another negative day to refresh the weekly low of around 111.95. The greenback’s gauge versus the major six currencies dropped after the final readings of the US Q2 Gross Domestic Product confirmed the initial forecasts of -0.6%.

It should be noted, however, that the US Weekly Initial Jobless Claims dropped to 193K for the period ended on September 24, versus the 209K previous (revised from 213K) and the market expectation of 215K.

Following the data, St. Louis Federal Reserve Bank President James Bullard praised the slump in the weekly Initial Jobless Claims and mentioned, "We will push inflation to 2% in a reasonable compact time frame." Elsewhere, Federal Reserve Bank of Cleveland President Loretta Mester said on Thursday that they are not yet at a point where they could start thinking about stopping interest rate hikes, as reported by Reuters.

At home, the first monthly CPI data from the Australian Bureau of Statistics (ABS), the headline price pressure eased in August to 6.8% from 7.0% in July. The same joins the Reserve Bank of Australia’s (RBA) recently cautious statements to challenge the AUD/USD buyers after the data release.

Elsewhere, the escalating energy crisis in Europe, Russia’s readiness to annex more parts of Ukraine and the chatters over China’s inability to tame recession woes were the extra challenges to the market sentiment, as well as to the AUD/USD pair.

Amid these plays, the Wall Street benchmarks reversed all of the gains made on Wednesday while the Treasury yields recovered.

Moving on, China is up for publishing the September month PMIs, the official one and also from Caixin, while the market forecasts aren’t that grim, the actual outcome will be crucial amid calls of recession in Australia’s biggest customer.

Technical analysis

A three-week-old falling wedge bullish chart pattern keeps AUD/USD buyers hopeful even if the RSI (14) and MACD joins the bearish fundamentals. That said, a successful upside break of the 0.6500 threshold appears necessary for the bulls whereas the 0.6440 and the latest multi-month low near 0.6365 can lure bears during the fresh downside.