AUD/USD fails to cheer China-linked positives as US Dollar rebounds ahead of Fed Powell’s speech

• AUD/USD takes offers to snap two-day uptrend, extends pullback from four-month high.
• Improvement in Aussie-China ties, upbeat employment conditions in Beijing fail to inspire AUD/USD bulls.
• Hawkish Fedspeak, Covid conditions in rural China challenge pair buyers.
• Fed Chair Powell’s speech precedes inflation numbers from China, US to direct short-term market moves.

AUD/USD renews its intraday low around 0.6900 as the Aussie bulls step back from a five-month high while snapping a two-day uptrend during early Tuesday. In doing so, the major currency pair takes clues from the latest recovery in the US Dollar and the US Treasury bond yields. That said, optimism surrounding the Aussie-China trade ties fail to impress the traders of late, mainly due to the cautious mood ahead of this week’s key catalysts, as well as mixed concerns.

Market’s chatters that China's reopening will add 1.0% to Australia's GDP and a turnaround in the Aussie-Sino relations during 2022 previously underpinned the AUD/USD run-up. Further, headlines from China State Media Xinhua signaled that the dragon nation achieved its annual urban job target despite Covid woes in 2022 also seemed to have put a floor under the Aussie prices. “China created 12.06 million new urban jobs in 2022, achieving the government's annual target despite the COVID hit to economic growth, state media Xinhua reported late Monday, citing the minister of human resources,” reported Reuters.

However, fresh fears surrounding the hawkish Fed speak and fresh Covid woes in rural China seemed to have probed the risk-barometer pair.

That said, Atlanta Federal Reserve bank president Raphael Bostic said on Monday that it is ''fair to say that the Fed is willing to overshoot.'' On the same line, San Francisco Federal Reserve Bank President Mary Daly stated that they are determined, united, resolute to bring inflation down. Additionally, the Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation declined to 5% in December from 5.2% prior. Alternatively, the three-year ahead expected inflation remained unchanged at 3% and the five-year ahead expected inflation edged higher to 2.4% from 2.3%.

Elsewhere, the recent headlines from Bloomberg suggesting fears of high COVID-19 figures from rural China, as the holiday season in the Asian major looms, also probe AUD/USD bulls. The news cites the death of facilities and drugs, as well as experts’ fears of a spike in Covid cases in January, to challenge the optimism surrounding China.

Amid these plays, the S&P 500 Futures remain lackluster around 3,915, down 0.05% intraday, whereas the US 10-year Treasury yields seesaw around a three-week low marked the previous day, close to 3.52% by the press time.

Looking forward, Fed Chairman Jerome Powell’s speech will precede Wednesday’s China inflation data and Thursday’s US Consumer Price Index (CPI) to direct short-term AUD/USD moves.

Technical analysis

Despite the latest pullback, AUD/USD sellers will need a clear downside break of the 200-DMA, around 0.6840 by the press time, to retake control.