AUD/USD pares Fed-inspired bounce below 0.6800 amid mixed sentiment, US GDP eyed

• AUD/USD fades post-Fed recovery after snapping two-day winning streak.
• Disappointment from Australia inflation, China woes supersedes unimpressive FOMC, Powell’s speech to keep Aussie bears hopeful.
• More clues of Aussie inflation eyed for immediate directions, highlighting Q2 Export-Import Price Index.
• Advance readings of US Q2 GDP, Durable Goods Orders will be crucial for clear directions.

AUD/USD fails to cheer the Federal Reserve’s (Fed) inability to please the US Dollar bulls for long, despite an initial 50 pips jump to 0.6783, as it retreats to 0.6760 amid early Thursday morning in Asia. In doing so, the Aussie pair traders seem to convey their dovish bias about the Reserve Bank of Australia (RBA) after the previous day’s downbeat inflation data. Also weighing on the risk-barometer pair could be the market’s cautious mood ahead of the top-tier US data and mixed headlines about China.

Federal Reserve (Fed) matched the widely forecasted increase of 25 basis points (bps) to the benchmark Fed rates toward the multi-year high in the range of 5.25%-5.50%. Following the rate decision, Fed Chairman Jerome Powell tried to placate the hawks by showing readiness for a September rate hike as he said, that the June inflation Consumer Price Index was welcomed but “was only one month's report.” It should be noted that the rejection of recession fears was also an effort to please the US Dollar buyers but failed.

On the other hand, Australia’s headline Consumer Price Index (CPI) for the second quarter (Q2) of 2023 drops to 0.8% QoQ versus 1.0% expected and 1.4% prior while the Reserve Bank of Australia (RBA) Trimmed Mean CPI came in as 1.0% compared to 1.1% market forecasts and 1.2% prior for the said period. Further, the Monthly CPI matches 5.4% analysts’ expectations for June versus 5.6% prior.

Following the downbeat Aussie inflation data, Australian Treasurer Jim Chalmers praised the direction but also added that there is a long way to go to beat inflation.”

Elsewhere, fresh challenges to the US-China ties, due to Washington’s push for a law to keep China investments from US companies in check, also seem to tease the AUD/USD bears of late.

Amid these plays, Wall Street benchmarks edged lower while the US 10-year Treasury bond yields marked the first daily loss in three by closing around 3.87%. That said, the US Dollar Index (DXY) also declined and marked a two-day losing streak before posting lackluster moves of late.

Looking ahead, the second-quarter (Q2) Export Price Index and Import Price Index from Australia will be closely examined for more clues about inflation and the next RBA move. Following that, the advance readings of the US Q2 GDP Annualized, expected to ease to 1.8% from 2.0%, as well as the Durable Goods Orders for June, likely easing to 1.0% from 1.8% prior (revised), will be eyed for clear directions. It should be noted that the European Central Bank (ECB) monetary policy meeting will also affect the US Dollar and hence should be watched for a clear guide.

Technical analysis

A clear U-turn from a fortnight-old resistance line, near 0.6785 by the press time, directs AUD/USD toward a three-week-old rising trend line, close to 0.6740 at the latest.