AUD/USD bulls flirt with 0.6800 as they seek validation from RBA’s Lowe, Fed

• AUD/USD remains sidelined after closely missing the bearish weekly close.
• US Dollar gained on upbeat data, pre-Fed anxiety and geopolitical fears.
• Aussie Dollar cheers optimism surrounding China, RBA’s positive tone.
• No major data from Australia on cards for publishing today but rest of the week will be too volatile.

AUD/USD began the key week on a dicey floor after closely missing the negative weekly print. In doing so, the Aussie pair portrays the typical pre-data anxiety ahead of the key monetary policy meeting of the US Federal Reserve, a speech from the Reserve Bank of Australia (RBA) Governor Philip Lowe and the US inflation numbers, not to forget Aussie jobs report for November. Given the slew of important catalysts lined up for publication, the Aussie pair struggles for clear directions and remains volatile.

That said, the US Dollar Index (DXY) printed the first weekly close on the positive side in the last three as the latest US economy came in better than expected.

The US Producer Price Index (PPI) matched the market forecasts of 7.4% YoY for November versus 8.1% prior. Further, the Core PPI rose to 6.2% YoY versus 6.0% expected and 6.7% previous readings. Additionally, preliminary readings of the University of Michigan’s (UoM) Consumer Sentiment Index rose to 59.1 for December versus 53.3 market forecasts and 56.8 final readings for November. Moreover, the 1-year inflation expectations dropped to 4.6%, the lowest since September 2021 while compared to 4.9% expected whereas 5-10 year expectations were stable at 3.0%.

Elsewhere, China continues to praise a reduction in the daily Covid cases and shows readiness for more stimulus. During the weekend, Nikkei Asia reported that China banks throw a $460 billion credit lifeline to the real estate sector.

At home, the RBA’s push for slower rate hikes failed to gain major acceptance as the policymakers showed readiness for stronger moves if needed. The same joins mixed data to restrict the AUD/USD moves.

Amid these plays, Wall Street closed in the red and yields improved, which in turn restricted the AUD/USD pair’s safe-haven demand and weighed on the prices ahead of the key week.

Moving on, a light calendar on Monday and a cautious mood ahead of the key data/events could restrict intraday moves of the AUD/USD pair. However, hopes of a hawkish hike by the Fed versus the RBA’s latest defense to the easy rate hike teases the pair sellers.

Technical analysis

A one-month-old bullish channel restricts short-term AUD/USD moves between 0.6870 and 0.6685 as the Aussie traders struggle to cross the 200-day EMA hurdle surrounding 0.6835.