AUD/USD defends Powell-led gains at 11-week high near 0.6800, Fed’s preferred inflation gauge eyed

• AUD/USD grinds at the highest levels since September 13.
• Aussie pair rallied the most in three weeks as Fed Chair Powell signaled easy rate hikes starting in December.
• Downbeat Australia Inflation, China PMIs failed to inspire bears on Covid-linked optimism.
• China Caixin Manufacturing PMI, US Core PCE Inflation and ISM Manufacturing PMI will provide fresh impulse.

AUD/USD bulls take a breather around 0.6785 after Fed Chairman Jerome Powell-led rally to the highest levels since mid-September. It’s worth noting that, the policymaker’s dovish signals allowed the Aussie pair to post the biggest daily run-up in three weeks.

It should be noted, however, that downbeat prints of Australia’s AiG Performance of Mfg Index and S&P Global Manufacturing PMI for November appeared to have probed the AUD/USD bulls at the multi-day high.

Fed Chair Powell spoke at the Brookings Institute on the economic outlook, inflation and employment late Wednesday while spreading the bearish remarks in his first public appearance after November’s Federal Open Market Committee (FOMC) meeting. The policymaker stated that it makes sense to moderate the pace of interest rate increases while also suggesting that the time to slow the pace of rate hikes could come as soon as the next meeting in December.

Ahead of him, Federal Reserve member of the Board of Governors Lisa D. Cook also spoke and praised the inflation data to signal that the Fed would likely take smaller steps as it moves forward.

It’s worth noting that the softening of the US employment numbers and optimism surrounding China’s Covid conditions also allowed the AUD/USD pair to remain firmer despite downbeat prints of Australia’s Monthly Consumer Price Index (CPI) for October. That said, US ADP Employment Change marked the lowest readings since January 2021 with 127K figure for November versus 200K forecast and 239K previous readings. On the other hand, the second estimate of the US Gross Domestic Product (GDP) Annualized for the third quarter (Q3) marked 2.9% growth versus 2.6% initial forecasts.

Amid these plays, Wall Street closed in the green and the US Treasury yields were down while the US Dollar Index (DXY) snapped a three-day uptrend.

Moving on, China’s private activity data may entertain AUD/USD traders, along with the risk catalysts. However, major attention will be given to the US Core PCE Inflation data for November and ISM Manufacturing PMI for the said month.

Also read: US October PCE inflation & ISM Manufacturing PMI Preview: Seen through Fed’s eyes

Technical analysis

A daily closing beyond the downward-sloping resistance line from the mid-September, now support around 0.6765, keeps AUD/USD buyers hopeful of approaching September’s top surrounding 0.6915, followed by the 200-DMA hurdle near 0.6925.