AUD/USD pares RBA-inspired gains below 0.6700 ahead of Australia Retail Sales, Fed

• AUD/USD stays defensive after reversing from one-week high.
• RBA’s surprise 0.25% rate hike pleased buyers before sour sentiment prods upside.
• US Dollar’s struggle to remain firmer, mainly on mixed data, push back bears.
• US ADP Employment Change, ISM Services PMI and banking updates are extra catalysts to watch for clear directions.

AUD/USD stays pressured around 0.6650, consolidating the Reserve Bank of Australia-inspired gains by retreating from a one-week high during early Wednesday in Asia. In doing so, the Aussie pair portrays the market’s cautious mood ahead of the top-tier data/events. Additionally, fears surrounding the banking fallouts and mixed US data also weigh on the Aussie pair prices.

That said, fresh selling of PacWest Bancorp and Western Alliance Bancorp shares triggered banking fears across the board and put a floor under the US Dollar price, especially amid hawkish Fed bets. However, mixed US data and softer US Treasury bond yields prod the greenback buyers ahead of the key US factors up for publishing.

At its May monetary policy meeting, the Reserve Bank of Australia (RBA) board members decided to lift the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85%. In doing so, the Aussie central bank officials defied market expectations of keeping the rates unchanged. Not only does the RBA announce a 0.25% rate hike but the Aussie central bank also expects further tightening of the monetary policy. That said, the RBA also revised its inflation and Gross Domestic Product (GDP) forecasts in the latest policy document. Additionally, RBA Governor Philip Lowe repeated that some further tightening may be required to bring inflation back to the 2-3% target within a reasonable timeframe.

On the other hand, US Factory Orders for March improved to 0.9% versus 0.8% expected and -1.1% (revised) previous readings. Elsewhere, the US JOLTS Job Openings for the said month eased to 9.59M from 9.974M prior and 9.775M market forecasts.

Amid these plays, Wall Street closed in the red and the US Treasury bond yields also dropped. However, the US Dollar Index (DXY) failed to cheer the risk aversion as the greenback’s gauge versus the six major currencies extend the previous day’s U-turn from a three-week high.

Looking forward, AUD/USD pair traders may initially pay attention to Australia Retail Sales for March, expected to print stagnant growth of 0.2% MoM, before waiting for the US ADP Employment Change for April and the ISM Services PMI for the said month. However, major attention will be given to the Federal Reserve (Fed) announcements and the banking headlines for clear guidance.

Also read: FOMC Meeting Preview: Powell to keep every door open, surprises not out of the table after RBA

Technical analysis

Unless providing a daily closing beyond a three-month-old descending resistance line, around 0.6720 by the press time, AUD/USD remains on the bear’s radar.