AUD/USD bears attack 0.6650 on strong US Dollar, Australia Wage Price eyed

• AUD/USD stays depressed after welcoming bears the previous day.
• Aussie bears previously cheered US debt ceiling concerns, strong US data and downbeat Australia job numbers.
• Disappointment from China data, dicey markets supersede receding fears of US default to exert more downside pressure on AUD/USD.
• Australia’s Q1 Wage Price Index, risk catalysts eyed for clear directions.

AUD/USD justifies its risk barometer status as it remains pressured near 0.6650 amid early Wednesday morning in Asia, after reversing the week-start gains the previous day. The Aussie pair’s latest inaction may also be linked to the cautious mood ahead of the key Aussie wage data, as well as receding fears of the US default. However, hawkish Fed talks and strong US data, as well as an absence of a strong message suggesting a US debt ceiling extension prod the Aussie bulls.

That said, Reuters reported that the Democratic President Joe Biden and top congressional Republican Kevin McCarthy's US debt ceiling negotiations ended on Tuesday after less than an hour, as the looming fear of an unprecedented American debt default prompted Biden to cut short an upcoming Asia trip. The news also mentioned that the meeting ended on an upbeat and unexpected note as McCarthy, coming out of the meeting with Biden and other congressional leaders, said, "It is possible to get a deal by the end of the week."

Following the news, Reuters quotes the S&P Global Market Intelligence data while marking a fall in the one-year US Credit Default Swap (CDS) spreads from 164 basis points (bps) to 155 bps. “Spreads on five-year CDS decreased to 69 basis points from 72 bps on Monday,” reported the news.

Elsewhere, US Retail Sales improved to 0.4% MoM for April, from -0.7% prior (revised) versus 0.7% expected. More importantly, Retail Sales Control Group for the said month crossed market forecasts of 0.0% and -0.4% prior with 0.7% actual figure whereas Retail Sales ex Autos matches 0.4% MoM estimations for April¸ surpassing the -0.5% prior. Further, the US Industrial Production MoM rose to 0.5% for April versus expectations of printing a 0.0% figure.

Talking about the Fed comments, Richmond Fed Thomas Barkin said in an interview with the Financial Times (FT) that if inflation persists, or God forbid accelerates, there’s no barrier in my mind to further increases in rates. On the same line, Cleveland Fed President Loretta Mester said, “I don’t think we're at that hold rate yet.”

It should be noted that the Reserve Bank of Australia’s (RBA) Monetary Policy Meeting Minutes showed the policymakers’ accord to the hawkish surprise even as some of the floors cited easing inflation fears and discussed policy pivot. Furthermore, downbeat data from China, Australia’s biggest consumer, also weigh on the AUD/USD price. Additionally, fears of more West versus Russia tension and the US-China tussles exert more downside pressure on the AUD/USD price. It should be noted that the recession woes are an extra load on the Aussie price.

Against this backdrop, the US Treasury bond yields remained firmer and Wall Street witnessed losses on Tuesday, which in turn allowed the US Dollar to cheer the haven demand. As a result, the AUD/USD price remained pressured.

Looking ahead, the RBA Meeting Minutes defend the policymakers’ hawkish bias and hence upbeat signal from today’s Aussie Q1 Wage Price Index, expected to increase to 3.6% YoY versus 3.3% prior, could allow the AUD/USD pair to pare recent losses. However, a light calendar elsewhere and mixed sentiment may keep the Aussie sellers hopeful.

Technical analysis

Sustained trading below the 200-DMA hurdle of around 0.6720 joins the firmer US Dollar to push the AUD/USD prices toward an upward-sloping support line from March 10, close to 0.6620 at the latest.