AUD/USD rebounds above 0.6400 on upbeat retail sales despite Powell’s hawkish tone

• AUD/USD registers gains of around 0.40%, as upbeat Australian retail sales data and falling US bond yields offer a respite from recent losses.
• CME FedWatch Tool shows a 49% chance of a 25 bps rate hike in November, keeping the pressure on AUD/USD despite its current gains.
• A packed economic calendar featuring US JOLTs report and remarks from RBA’s nominated Governor, Michelle Bullock, could introduce new volatility to the pair.

The Australian Dollar (AUD) reverses its course advances from around last week’s low of 0.6380 against the US Dollar (USD), bolstered by upbeat economic data, despite a hawkish rhetoric by the US Federal Reserve (Fed). Falling US bond yields lent a lifeline to the AUD, as the AUD/USD trades at 0.6428, gaining 0.42%.

AUD gains traction as US bond yields dip, as markets eye data releases

The AUD/USD is set to extend its losses after the US Federal Reserve Chair, Jerome Powell, delivered hawkish remarks at Jackson Hole. Even though the pair is staging a comeback after snapping two days of losses, the resumption of higher US bond yields could underpin the greenback in the near term.

Powell said that despite two good reports on inflation, it would be appropriate to tighten monetary policy and that they would proceed “carefully” when choosing to hike rates or stay put. Jay Powell states they would remain data-dependant and warranted additional hikes if “above trend growth”  and employment remained solid.

Following Powell’s remarks, money market futures are confident the Fed will skip a rate hike in September, but the odds for November are rising, as shown by the CME FedWatch Tool seeing a 49% chance of a 25 bps rate hike,

The US Dollar Index, a gauge of the buck’s value against a basket of six currencies, drops to its daily low at 103.977, a headwind for the USD/MXN.

Developments in the Asian session witnessed China’s delivering stimulus amidst its troubled property sector and its equity markets. That spurred a risk-on response, with AUD/USD buyers propelling the currency pair back above the 0.6400 figure.

Data during the Asian session, the Australia economic docket revealed that retail sales for July jumped by 0.5% MoM, after a dismal 0.8% in June, exceeding estimates of 0.3%. However, it should be said that the Women’s World Cup boosted sales.

ANZ analysts think the trend in retail sales will continue to be lower. They said, “We think households will continue to tighten their spending throughout 2023. We do, however, see some upside to spending in 2024 as inflation moderates and real household incomes turn positive.”

On Tuesday, the US economic docket would feature the JOLTs report, housing prices, and the CB Consumer Confidence. The Reserve Bank of Australia’s (RBA) nominated Governor Michelle Bullock would cross newswires on the Australian front. That, alongside the release of Building Permits, Construction Work done, and the Consumer Price Index (CPI) for July on a monthly basis, could stir the AUD/USD.

AUD/USD Price Analysis: Technical outlook

The AUD/USD is likely to remain consolidated despite registering solid gains. For the pair to resume its uptrend, buyers must reclaim the latest swing high of 0.6488, ahead of challenging 0.6500. Otherwise, since the major remains in a downtrend, an extension below last week’s low of 0.6379, and the pair might test the year-to-date (YTD) low of 0.6364, ahead of diving towards the November 22 daily low at 0.6272.