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AUD/USD stays bearish near 0.6600 amid China, First Republic inflicted fears ahead of RBA, Fed

  • AUD/USD fades bounce off seven-week low amid sour sentiment, anxiety before key data/events.
  • US FDIC calls for bids to turn First Republic bank, China PMIs disappoint.
  • Recent data suggests divergence between the RBA and the Fed monetary policy.
  • US NFP, second-tier Aussie data and risk catalysts are also important to entertain Aussie pair traders.

AUD/USD justifies its risk barometer status as the pair sellers attack the 0.6600 round figure, fading the late Friday’s corrective bounce after refreshing the seven-week low, during early Monday in Asia. In doing so, the Aussie pair bears the burden of the risks emanating from downbeat China activity data for April and the auction of another US bank, namely the First Republic Bank. Also exerting downside pressure on the Aussie pair is the cautious mood ahead of this week’s monetary policy meeting of the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed).

Having witnessed a slump in the First Republic shares and fleeing deposits from the US bank, the Federal Deposit Insurance Corporation (FDIC) finally took a tough decision to call in bids for the troubled bank. The same attracted multiple top-tier private organizations, including JP Morgan, to bid for the bank’s takeover. The results are up for release and can give only knee-jerk optimism as an immediate defense of the bank by a private player isn’t a solution to the broad banking problems. On the contrary, the same raises fears of such actions for the larger public banks in the future.

During the weekend, China’s official NBS Manufacturing PMI disappointed markets with 49.2 figures for April, versus 51.4 market forecasts and 51.9 prior readings. It’s worth noting that the Non-Manufacturing PMI rose past 50.4 expected figures to 56.4 but remained below 58.4 reported in March. With the downbeat numbers from Australia’s biggest customer, as well as the banking fears, the AUD/USD pair remains pressured of late.

In the last week, headline inflation numbers from Australia have disappointed the Aussie pair buyers, on both the monthly and the quarterly format. The same joins the RBA’s latest pause in the rate hike trajectory to raise the odds of witnessing one more status quote decision by the Australian central bank.

On the other hand, the first readings of the US Gross Domestic Product (GDP) for the first quarter (Q1) of 2023, also known as Advance readings, marked mixed outcomes. That said, the headline US GDP Annualized eased to 1.1% from 2.0% expected and 2.6% prior but the GDP Price Index inched higher to 4.0% on an annualized basis from 3.9% prior and 3.8% market consensus. Further, the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, for March matched 0.3% market forecasts and prior to MoM but rose to 4.6% from 4.5% expected on YoY, with an upwardly revised previous reading of 4.7%. On the same line, the US Employment Cost Index also increased by 1.2% in Q1 2023, versus the 1% increase marked previously.

Amid these plays, S&P 500 Futures print mild losses even as Wall Street closed positive and the yields eased.

Moving on, AUD/USD pair may remain pressured amid the market’s cautious mood ahead of the top-tier data/events, as well as due to the sour sentiment. However, major attention will be given to the RBA and Fed moves as a monetary policy divergence appears to brew.

Technical analysis

Unless rising back beyond the previous support line stretched from early March, close to 0.6665 by the press time, the AUD/USD pair is well-set to refresh the yearly high of around 0.6565.

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