AUD/USD struggles to justify risk-on mood above 0.6800 amid US Dollar rebound

• AUD/USD snaps three-day downtrend despite struggling to pick-up bids of late.
• Updates from the key US banks, China allow markets to remain hopeful.
• Strong US Core Retail Sales help US Dollar Index to rebound from 15-month low.
• RBA Minutes failed to inspire Aussie bulls, risk catalysts eyed for clear directions.

AUD/USD edges higher past 0.6800, close to 0.6815 during the early hours of Wednesday’s Asian session, as market players remain optimistic amid receding fears of higher rates and the upbeat performance of the US banks. Also keeping the Aussie pair firmer could be the reassessment of the previous day’s monetary policy meeting minutes from the Reserve Bank of Australia (RBA), as well as headlines surrounding Australia’s biggest customer, namely China.

Market sentiment improves on the positive performance of the US banks, as well as the risk-positive headlines surrounding China, which in turn allowed the Wall Street benchmarks to refresh the yearly top. It’s worth noting, however, that the benchmark US 10-year Treasury bond yields remain pressured around 3.78% while the two-year counterpart edges higher near 4.76% at the latest.

With this, the share prices of the top-tier US banks like Bank of America, Morgan Stanley and Bank of New York Mellon Corp rallied on Tuesday on news that higher interest rates had helped boost profits in the second quarter, shared via Reuters. “Signs of a revival in investment banking, which has been in the doldrums as higher rates and economic uncertainty put a damper on deals and trading, also drove share gains,” said the news.

Talking about China, Washington’s efforts to re-establish ties with Beijing, via multiple diplomatic visits one after the other, join the dragon nation’s rejection of economic fears and hopes of witnessing a 5.0% growth rate in 2023 to underpin optimism about the world’s biggest industrial player. It should be noted that China’s easy prints of the second-quarter (Q2) Gross Domestic Product (GDP) flagged economic fears about the second-largest economy and prod the AUD/USD buyers previously.

Talking about the RBA Minutes, the latest statement stated that the board agreed some further tightening may be required,” adding that “they would reconsider at the August meeting.

On the other hand, US Retail Sales growth for June came in as 0.2% MoM versus 0.5% expected and prior (revised). However, the Retail Sales Control Group marked 0.6% growth versus market forecasts of -0.3% and 0.3% previous readings. It should be noted that the US Industrial Production reprinted -0.5% for June compared to analysts’ estimations of 0.0%.

Amid these plays, Wall Street benchmarks rallied but the US Treasury bond yields edged lower while the US Dollar Index (DXY) initially dropped to a fresh 15-month low before bouncing off 99.56 level, around 99.95 by the press time.

Moving on, the second-tier data from Australia and the US may entertain the AUD/USD pair traders but major attention should be given to the risk catalysts for clear directions.

Technical analysis

Despite bouncing off multiple tops marked since early April, surrounding 0.6780-85, the AUD/USD is not out of the woods unless crossing the double tops near the 0.6900 round figure.