AUD/USD bulls struggle with 0.6750 hurdle on Australia holiday, US inflation, Fed eyed

• AUD/USD picks up bids to refresh intraday high but stays sluggish at the highest level in a month.
• RBA’s hawkish surprise joins dovish Fed bias to propel Aussie pair prices.
• Australian markets are off due to the King’s Birthday.
• Concerns about US inflation, Fed moves will be important for near-term directions.

AUD/USD renews intraday high near 0.6745 but fails to print any impressive start of the key week amid Monday’s holiday in Australia. It’s worth noting that the mixed concerns about the RBA versus the Fed divergence and challenges to the sentiment also prod the Aussie pair buyers as the key week comprising the Federal Open Market Committee (FOMC) monetary policy decision and the US inflation begins.

In the last week, the Reserve Bank of Australia’s (RBA) surprise rate hike joined firmer China Caixin Services PMI to underpin the bullish bias about the AUD/USD pair. On the same line, increasing odds of the Federal Reserve’s (Fed) status quo during this week’s monetary policy meeting, backed by softer US data, also allowed the AUD/USD pair to remain firmer.

However, the softer prints of Aussie and China trade numbers, as well as mixed comments from the Chinese central banker, prod the risk barometer pair as traders reassess dovish Fed bias.

It should be noted that the US Dollar Index (DXY) dropped in the last two consecutive weeks to 103.56 at the latest, grinding near the bottom by the press time, as downbeat prints of the US activity numbers for May joined disappointing employment clues to weigh on the US Dollar. That said, the latest United States Initial Jobless Claims jumped to the highest levels since September 2021 whereas the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed softer outcomes for May and pushed back the Fed hawks, which in turn weighed the US Dollar.

That said, market players placed higher bets on the US Federal Reserve’s no rate change decision in its June 13-14 policy meeting. That said, the CMEGroup's Fed watch tool suggests around 72% chance of the Fed rate being unchanged to the 5%-5.25% range.

Elsewhere, economic concerns about Australia’s biggest customer, namely China, and fears of global recession also prod the AUD/USD buyers. People's Bank of China (PBOC) Yi Gang said in a statement on Friday that China's Q2 GDP YoY growth is expected to be high mainly due to base effects. The policymaker added, “There is plenty of room for policy adjustment.”

Amid these plays, Wall Street benchmark ignored upbeat yields to remain firmer while the S&P500 Futures print mild gains at the latest.

Moving on, holiday in Australia and light calendar elsewhere will restrict immediate AUD/USD moves ahead of Tuesday’s US Consumer Price Index and Wednesday’s Fed Meeting. Also important to watch is Thursday’s Aussie employment data.

Above all, market’s reassessment of the hawkish concerns about the RBA and fears that the Fed hawks aren’t off the table due to the inflation woes prod the AUD/USD buyers.

Technical analysis

Although the AUD/USD pair crosses the key hurdle to the north surrounding 0.6740, comprising a downward-sloping trend line from mid-February, the 200-day Exponential Moving Average (EMA), at 0.6755 by the press time, challenges the bulls.