AUD/USD: Bears keep reins below 0.7200 on sour sentiment, China PMI eyed
- AUD/USD remains pressured around five-week low, sellers pause lately.
- Fears over China, Evergrande and US debt ceiling extension weigh on market sentiment.
- Fed tapering concerns, multi-day high Treasury yields also underpin USD buying.
- China NBS Manufacturing PMI, second-tier Aussie data will offer immediate direction, risk catalysts are the key.
AUD/USD stays depressed around the late August levels near 0.7170 during early Thursday morning in Asia, after printing the heaviest daily loss in five weeks the previous day. The risk barometer pair failed on multiple attacks from the Fed, China and US issues concerning the debt limit and infrastructure spending package ahead of today’s key China activity numbers.
Amid a slew of US Federal Reserve (Fed) policymakers’ speeches, tapering has been a common word of late. Recently, Fed Chairman Jerome Powell defends his push for scaling back the easy money while teasing a fight against heating inflation, despite terming it “transitory”. The Fed leader hints that the world’s largest economy is ready for taper, hinting at firmer jobs report.
While the Fed tapering concerns underpinned the US Treasury yields to refresh the highest levels in 15 weeks, before easing to 1.54%, upbeat prints of US Pending Home Sales for August also weighed on the bond prices, providing additional strength to the US dollar.
Other than the taper tantrum, fears that China is in muddy water, not only due to Evergrande but also because of power cuts, weigh on the AUD/USD prices due to Australia’s close trade links with Beijing. Fitch joined the global rating agencies and banks to cut the dragon nation’s credit rating. Further, Evergrande missed another bond coupon payment to enjoy the 30-day grace period, making conditions murkier.
Elsewhere, the US policymakers keep jostling over the US stimulus and debt ceiling extension in the Senate even as President Joe Biden canceled the Chicago trip to placate the opposition, but he can’t so far.
Amid these plays, Wall Street closed mixed but the US Dollar Index (DXY) benefited from the risk-off mood while flashing the heaviest daily jump since mid-June to print a one-year high, dragging the Antipodeans the most.
Given the adverse risk appetite and pessimism surrounding China, today’s activity figures from the dragon nation will be the key as power cuts may mark their impact on the already struggling figures and drown the AUD/USD on weak figures. That said, the official NBS Manufacturing PMI is likely to remain unchanged at 50.1 while Caixin Manufacturing PMI bears an upbeat forecast of 49.5 versus 49.2 prior for August. Further, the Non-Manufacturing PMI may rise from 47.5 to 52.7 during the stated month. Should the actual figures meet the upbeat forecasts, AUD/USD can provide a knee-jerk reaction but the bears are less likely to lose the battle.
Technical analysis
In addition to an upward sloping trend line from August 20, AUD/USD also broke monthly horizontal support, respectively around 0.7250 and 0.7220, which in turn directs the quote towards the yearly low of 0.7105.