AUD/USD struggles near 0.6850 as risk-on mood ebbs ahead of Aussie employment, US inflation

• AUD/USD struggles to extend the weekly gains, remains sidelined of late.
• Fears emanating from China, light calendar tests pair buyers.
• Hopes of overcoming inflation fears jostle with receding hawkish expectations from RBA to restrict the upside moves.
• China’s off, light calendar and cautious mood ahead of the key top-tier data may test the momentum traders.

AUD/USD bulls struggle to keep reins, after posting the biggest weekly rebound in five, amid Monday’s sluggish Asian session. In addition to China’s holiday, fears emanating from the dragon nation and a light calendar also challenge the Aussie pair traders around the mid-0.6800s by the press time.

The Mid-Autumn Festival results in a bank holiday in China, the largest customer of Australia, which in turn tests the AUD/USD pair buyers as the quote previously cheered hopes of more stimulus from the dragon nation.

Also challenging the upside momentum is the latest news from Reuters suggesting that US President Joe Biden is to hit China with broader curbs on US chip and tool exports. On the same line could be the analysis suggesting a 20-year low oil demand from China due to covid curbs, shared by Reuters.

It’s worth noting that comments from US Treasury Secretary Janet Yellen and some of the prominent Fed policymakers could also be linked to the AUD/USD pair’s latest struggle to keep buyers on the board.

That said, US Treasury Secretary Janet Yellen mentioned that, during the CNN interview on Sunday, “Fed is going to need skill and luck to bring inflation down while maintaining labor market strength.” The policymaker also mentioned that US consumers could experience a spike in gas prices in winter when the European Union significantly cuts back on buying Russian oil.

Elsewhere, Federal Reserve Governor Christopher Waller was the prominent one as he said on Friday that he supports another significant hike in two weeks. On the same line was Kansas City Fed President Esther George who said, as reported by Reuters, “Case for continuing to remove policy accommodation is clear cut.” Furthermore, Cleveland Federal Reserve Bank President Loretta Mester said, “One inflation report is insufficient to alter one's outlook.” The policymaker also stated that he sees policy rates rising slightly above 4% by early 2023.

It should be noted that a divergence between Fed Chairman Jerome Powell’s hawkish tone and Reserve Bank of Australia (RBA) Governor Philip Lowe’s hesitance in suggesting aggressive rate hikes seemed to have also challenged the AUD/USD buyers of late.

Amid these plays, Wall Street marked another positive day and the US Treasury yields remained sluggish for the 10-year while being firmer for the two-year tenure. The S&P 500 Futures prints mild gains at the latest.

Given the light calendar and China’s holiday, AUD/USD traders may witness a lackluster day ahead. However, Tuesday’s US Consumer Price Index (CPI) and Thursday’s Australia jobs report are the key catalysts for the pair traders to watch for clear directions.

Technical analysis

AUD/USD bulls are at the test as buyers attack the monthly bearish channel’s resistance line, at 0.6870 at the latest. Also acting as an upside hurdle is the 50-DMA level near 0.6900. It’s worth noting, however, that the impending bull cross on the MACD and firmer RSI favor the pair’s upside momentum.