AUD/USD keeps pullback from 0.6480 upside hurdle amid cautious markets, Fed Chair Powell in the spotlight

• AUD/USD licks its wounds after falling the most in three weeks the previous day.
• Markets brace for key central bank speeches at Jackson Hole Symposium.
• Mixed concerns about policy pivot, higher for longer rates prod traders amid light calendar.
• US Dollar stays firmer on mostly upbeat data, hawkish Fed talks ahead of Powell’s speech.

AUD/USD stays defensive around 0.6410-15 amid a lackluster Asian session on Friday, after a heavily volatile Thursday.

The Aussie pair dropped the most in three weeks the previous day while reversing from the weekly top, as well as the key resistance line, as the US Dollar cheered broad risk-off mood and mostly upbeat US data, not to forget recently hawkish Fed speak. However, the cautious mood ahead of today’s Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium restricts the risk-barometer pair’s immediate moves.

It should be noted that the mixed concerns about China, Australia’s biggest customer, also prod the AUD/USD moves.

That said, US-China optimism appears to fade as the Chinese Commerce Ministry said in a statement on Thursday, “China will state its stance on economic and trade matters of concern,” while adding that they will push financial institutions to expand credit to businesses.  China’s Commerce Ministry also called on the US to cancel potential arms sales to Taiwan, which in turn flagged fears of geopolitical tension when US Commerce Secretary Gina Raimondo visits Beijing next week.

Elsewhere, Australia’s Trade Minister Dan Tehan appeared optimistic about getting a better EU free trade deal offer after negotiations stalled in July.

Talking about the US data, the Durable Goods Orders for July marked the biggest slump since April 2020 by posting a -5.2% MoM figure versus -4.0% expected and 4.4% prior growth (revised). However, the Durable Goods Orders ex Transportation marked a positive surprise with 0.5% figures versus 0.2% market forecasts and previous readings. Further, the Nondefense Capital Goods Orders ex Aircraft also improved to 0.1% while matching the analysts’ estimations compared to -0.4% marked in June.

Additionally, the Chicago Fed National Activity Index for July improved to 0.12 from -0.33 prior whereas the Kansas Fed Manufacturing Activity Index for August was 12.0 versus -20.0 previous readings. On the same line, the weekly figures of the Initial Jobless Claims and Continuing Jobless Claims eased and signaled positive employment conditions.

After witnessing the mixed data, the Fed hawks allowed the US dollar to stay firmer. First, former St. Louis Federal Reserve President James Bullard underpinned the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.

Against this backdrop, Wall Street closed in the red whereas the benchmark US 10-year Treasury bond yield prints mild weekly losses despite rising to the highest level since 2007 earlier in the week, as well as posting firmer closing the previous day. That said, the S&P500 Futures appears dicey near 4,390 after reversing from the weekly top with heavy losses.

Moving on, a light calendar may restrict immediate AUD/USD moves amid cautious markets. However, the bearish bias remains impulsive considering Fed Chair Powell’s hawkish nature.

Technical analysis

A clear U-turn from the six-week-old descending resistance line, around 0.6480 by the press time, keeps the AUD/USD bears hopeful of witnessing the fresh Year-To-Date (YTD) low, currently around 0.6365.