AUD/USD justifies risk aversion, downbeat China data and RBA Minuets as bears eye 0.6650

• AUD/USD takes offers to renew intraday low, reverses the week-start rebound.
• Market sentiment worsens as US policymakers jostle about the debt ceiling issue.
• Softer China data, RBA’s policymakers’ hesitance to defend the latest hawkish surprise favor Aussie pair buyers.
• US Retail Sales, debt ceiling talks will be crucial for clear directions ahead of Australian Wage Price Index, employment numbers.

AUD/USD recalls sellers as it drops to 0.6675 while printing mild losses amid early Tuesday morning in Europe after posting an upbeat start of the week. The Aussie pair’s latest weakness could be linked to the risk-off mood, as well as downbeat signals from the Reserve Bank of Australia (RBA) and China.

That said, the RBA’s May month monetary policy meeting minutes fail to justify the latest hawkish surprise as it cited that easing inflation pressure. The Minutes also showed the policymakers’ concerns about the sluggish productivity growth weighing on the AUD/USD prices. 

Also read: RBA Minutes: Board considered pausing or hiking 25 basis points in may policy decision

On the other hand, the People’s Bank of China (PBOC) keeps the one-year Medium-term Lending Facility (MLF) rates unchanged at 2.75%, per the latest update, which in turn prods the AUD/USD buyers. Additionally, the Chinese central bank also released its quarterly economic report stating that China's economy isn’t experiencing deflation and that economic growth is set to rebound sharply. However, downbeat prints of China data supersede the price-positive signals for the Aussie pair. It should be noted that China Industrial Production grew 5.9% for April versus 10.9% expected and 3.9% prior whereas the Retail Sales rose 18.4% YoY from 10.6% prior and 21.0% market forecasts.

On a different page, the White House announced a meeting between President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy to overcome the looming US default. Ahead of the event, the US policymakers appear somewhat optimistic about extending the debt ceiling limit before the June expiry. However, the latest comments from United States House Speaker Kevin McCarthy saying, “I don’t think we’re in a good place,” also seem to weigh on the Gold price, via fears of deadlock on the US debt ceiling extension as Republicans may stick to their demand.

Against this backdrop, S&P 500 Futures dropped 0.30% intraday even as Wall Street closed positive and the yields remain pressured, which in turn shows the market’s indecision and awaits the important data/events for clear directions.

Looking forward, AUD/USD may remain pressured amid the market’s risk-off mood ahead of the US Retail Sales for April, expected at 0.7% MoM versus -0.6% prior. Following that, the talks between US President Biden and House Speaker McCarthy to avoid debt expiration will be crucial to watch as the deadline for US default looms, recently brought forward to the first week of June. It’s worth observing that Wednesday’s quarterly prints of the Australia Wage Price Index for the first quarter (Q1) and Aussie employment numbers for April will also entertain the Aussie pair traders.

Technical analysis

Unless providing a daily closing beyond the 200-DMA, around 0.6720 at the latest, the AUD/USD remains on the bear’s radar.