AUD/USD regains 0.6900 amid corrective pullback ahead of RBA’s Lowe

  • AUD/USD picks up bids to refresh intraday high, snaps two-day downtrend around eight-day low.
  • Markets consolidate recent losses amid a lack of major data/events.
  • Fed Chair Powell’s testimony, US PMIs raised concerns over economic slowdown and drowned the pair.
  • RBA’s Lowe may help buyers on repeating the latest hawkish bias.

AUD/USD pares recent losses around 0.6900 as recession fears stall, for the time being, amid a quiet Asian session on Friday. Also keeping the Aussie buyers hopeful is the scheduled speech from Reserve Bank of Australia (RBA) Governor Philip Lowe, around 11:30 GMT.

Fears of economic slowdown triggered the market’s rush to risk safety the previous day, which in turn weighed on the AUD/USD prices due to its risk-barometer status. In doing so, the Aussie pair couldn’t cheer upbeat PMIs at home, nor the softer US activity numbers, as the US dollar benefited from the risk-aversion wave.

That said, the preliminary readings of Australia’s S&P Global PMIs for June came in mixed as the Manufacturing and Services PMIs rose past market forecasts and priors but the Composite PMI eased below the previous readouts. The Manufacturing PMI rose to 55.8 versus 54.7 expected and 55.7 prior whereas the S&P Global Services PMI rose past 49.1 market consensus to 52.6, versus 53.2 previous readings. It should be noted that the Composite PMI eased below 52.9 to 52.6 in June.

On the other hand, S&P Global Services PMI for the US slumped to 51.6 in June from 53.4 prior, not to forget missing the 53.5 forecasts. Further, the Manufacturing PMI not only missed the market expectation of 56 by a wide margin in June, to 52.4 versus 57.00 previous readings, but also slumped to a nearly two-year low.

Elsewhere, Federal Reserve (Fed) Chairman Jerome Powell cited inflation and recession woes as the challenges to ensure a smooth landing, despite expecting firmer growth this year, during his second round of Testimony. The central banker’s concern for recession joined downbeat US data to favor the risk-off mood.

While portraying the mood, the S&P 500 Futures drop 0.30% while the US 10-year Treasury yields remain unchanged at around 3.09% after dropping to a fortnight low the previous day.

Moving on, RBA’s Lowe is likely to reiterate his hawkish bias, especially after the recently upbeat Aussie PMIs, which in turn could favor the AUD/USD bulls. However, any mentioning of economic fears could join the latest downbeat performance of iron ore, Australia’s key export item, to recall the bears.

Technical analysis

A six-week-old support line around 0.6855-60 puts a floor under the AUD/USD downside. Recovery moves, however, need validation from a downward sloping resistance line from June 07, at 0.6930 by the press time. 

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