- AUD/USD remains on the defensive despite a modest USD pullback from the daily high.
- The US bond yields retreat in reaction to the mixed US macro data and weigh on the buck.
- Aggressive Fed rate hike bets, recession fears limit the USD losses and continue to cap.
- Investors now eye the Chinese data dump on Friday for some meaningful opportunities.
The AUD/USD pair once again finds some support ahead of the 0.6700 mark and recovers a few pips from the daily low during the early North American session. The pair is currently trading around the 0.6725-0.6730 area, still down over 0.20% for the day.
The US dollar struggles to preserve its early modest gains and remains on the defensive for the second straight day on Thursday, which, in turn, offers some support to the AUD/USD pair. The mixed US economic data triggers an intraday pullback in the US Treasury bond yields and undermines the greenback.
That said, rising bets for a more aggressive policy tightening by the Fed, bolstered by Tuesday's stronger US CPI report, should act as a tailwind for the US bond yields. Apart from this, worries about a global economic downturn might continue to favour the USD bulls and cap the upside for the risk-sensitive aussie.
The fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the downside. That said, it will still be prudent to wait for a sustained break below the 0.6700 mark before positioning for any further depreciating move. Traders now look forward to the Chinese data dump for a fresh impetus during the Asian session on Friday.
The focus, however, will remain on the key central bank event risk – the two-day FOMC monetary policy meeting on September 20-21. The outcome will play a key role in driving the USD demand in the near term and help determine the next leg of a directional move for the AUD/USD pair.