AUD/USD retreats towards 0.6600 on mixed concerns about China, US debt ceiling negotiations

• AUD/USD fades bounce off intraday low, struggle to defend the previous day’s bounce off one-month low.
• US President Joe Biden appears optimistic about Sino-American ties, US debt ceiling talks.
• China bans Micron Technology, US Republicans seem to stick to their demand and prod risk-on mood.
• PBOC inaction, doubts about hawkish RBA challenge Aussie pair buyers amid mixed Fed talks.

AUD/USD prods intraday low surrounding 0.6645 as it reverses the early Asian session strength amid mixed macros and a cautious mood ahead of this week’s key data/events. It’s worth noting, however, that the Aussie pair bounced off the lowest levels in a one-month the previous day but has been struggling to defend the bulls of late.

Despite China’s banning of Micron Technology products, per the Wall Street Journal (WSJ), US President Joe Biden said at the end of the Group of Seven (G7) summit in Japan on Sunday, he expected ties with China to improve “very shortly” after a spat over an alleged spy balloon earlier this year derailed relations, per Bloomberg. The policymaker also conveyed optimism about his discussion with Republican House Speaker Kevin McCarthy went well while also adding that they will again talk on Monday.

On a different page, the People’s Bank of China (PBOC) holds its benchmark monetary policy rates, namely the Loan Prime Rates (LPR), unchanged during Monday's announcement. That said, the latest PBOC LPRs for one year and five-year are 3.65% and 4.30%. It should be noted that China Securities Journal (CSJ) earlier raised hopes of China’s economic recovery and favored the AUD/USD bulls to defend the previous day’s rebound before the latest retreat.

Previously, the market’s bets of a 0.25% Fed rate hike in June increased and the calls for a rate cut in 2023 have gone down due to the last week’s upbeat US economics and hawkish comments from the Fed (Fed) officials. It’s worth noting, however, that Federal Reserve Chairman Jerome Powell highlighted inflation fears on Friday but also stated that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates.

Against this backdrop, S&P 500 Futures appear indecisive while stocks in the Asia-Pacific zone grind lower amid the market's cautious mood ahead of today’s key US debt ceiling talks and the week’s Aussie-US PMIs, as well as Fed Minutes.

Technical analysis

AUD/USD retreats from the upper line of a one-week-old descending trend channel. close to 0.6670 by the press time. Even so, a convergence of the 100-SMA and 200-SMA, around 0.6685-90, appears a tough nut to crack for the AUD/USD bulls to crack before taking control.