AUD/USD sellers keep the reins at three-week low near 0.6600 ahead of Australia Retail Sales

• AUD/USD licks its wounds at the lowest levels in three weeks after falling the most since early March.
• Disappointing Australia inflation, hawkish Fed comments and China concerns weigh on Aussie pair.
• Australia Retail Sales for May, mid-tier US data eyed for clear directions.

AUD/USD bears take a breather at the lowest levels since June 05, after posting the biggest daily loss in more than three months, as traders await Australia’s Retail Sales for May to extend the previous slump inflicted by Aussie inflation and hawkish Fed signals, not to forget China woes. That said, the major currency pair remains pressured near the 0.6600 round figure amid the early hours of Thursday’s Asian session.

On Wednesday, Australia’s Monthly Consumer Price Index (CPI) for May dropped to 5.6% YoY versus 6.1% expected and 6.8% prior. The same amplifies concerns about the Reserve Bank of Australia’s (RBA) pause in the rate hikes after two consecutive hawkish surprises, which in turn drowns the Australian Dollar (AUD). Adding strength to the downside momentum was China's Industrial Profits for May which dropped nearly 19% during the first five months of 2023.

Furthermore, the fresh fears surrounding the US-China tension, due to the Wall Street Journal (WSJ) news suggesting more AI curbs for companies from Beijing, joined the early week’s upbeat US data to weigh on the AUD/USD price.

On the other hand, hawkish comments from Fed Chair Jerome Powell at the ECB Forum and upbeat US Banking Stress Test results also exert downside pressure on the AUD/USD pair.

In his speech at the European Central Bank (ECB) Forum on central banking, Federal Reserve (Fed) Chairman Jerome Powell said, “We believe there's more restriction coming, driven by the labor market.” The policymaker also ruled out the economic downturn as the most likely case.

Elsewhere, “The Fed's ‘stress test’ exercise showed lenders, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends,” reported Reuters.

Against this backdrop, Wall Street closed mixed and the bond yields were down while the US Dollar Index (DXY) marked the first daily gains in three and refreshed the weekly top.

Moving on, AUD/USD traders should pay attention to the first readings of Australia’s Retail Sales for May, expected 0.1% versus 0.0%, for immediate directions. Should the numbers arrive as stronger, the Aussie pair will have a reason to consolidate the previous day’s heavy losses.

“We thought AU CPI data would unleash volatility and it has, but the trouble is, it hasn’t really clarified the market’s view on whether the RBA will hike or not next week and that’s the next hurdle for the AUD, and by correlation the Kiwi,” said Analysts at the ANZ.

Apart from the Aussie data, the revised version of the US Gross Domestic Product (GDP) for the first quarter (Q1) 2023 and second-tier employment data could also entertain the traders. Furthermore, Fed Chair Powell is again scheduled for a speech in Madrid at a conference on Financial Stability and hence may allow the traders to witness a volatile day ahead.

Technical analysis

Although the oversold RSI (14) prods the AUD/USD bears, the pair’s sustained trading below the 200-DMA, around 0.6690 by the press time, directs the bears toward the 0.6580 support.