AUDUSD recovers from its intraday low on positive China Caixin Services PMI, US data

On positive China statistics, the AUDUSD picks up bids to rebound from its intraday low.

After China’s private activity indicator flashed positive indications early Monday, the AUDUSD pared intraday losses around 0.6600. The earliest Asian session report indicating higher inflation in Australia might provide strength to the Aussie pair’s corrective recovery.

Nonetheless, China’s Caixin Services PMI for May matches market expectations of 57.1, up from 56.4 in April. Earlier in the day, Australia’s TD Securities Inflation climbed 0.9% MoM in May, compared to 0.2% the previous month. It should be noted, however, that the TD Securities Inflation prints on a YoY basis. Along with a decrease in the nation’s Company Gross Operating Profits for the first quarter (Q1), prod the AUDUSD bulls.

Sluggish sentiment, RBA jitters, and hawkish Fed bets keep Aussie bears optimistic.

On the other side, hawkish Fed bets combine geopolitical concerns to weigh on the AUDUSD market particularly amid suspicions of a policy shift by the Reserve Bank of Australia (RBA). After Friday’s Nonfarm Payrolls (NFP) shocked markets, expectations for the Fed’s 0.25% rate hike in June rose but expectations for a Fed rate cut in 2023 fell. Nonetheless, nonfarm payrolls (NFP) in the United States increased by 339,000 in May, compared to 190,000 projected and 294,000 before (revised).

It should be noted, however, that the unemployment rate has also risen to 3.7%, up from 3.4% previously. Versus market expectations of 3.5%. It should be emphasized that while average hourly earnings have decreased. The labor force participation rate has remained same.

In other news, the Shangri-La Dialogue in Singapore heightened geopolitical tensions between the United States and China. Despite the fact that neither country’s policymakers met and an incident in the Taiwan Strait suggested rising war fears between the Sino-American militaries.

Furthermore, reports from the Russian Defense Ministry implying large-scale military activities by Ukraine weigh on sentiment and put a floor under the US Dollar.

In this context, US 10-year and two-year Treasury bond rates have recovered. After breaking a three-week uptrend at the conclusion of last Friday. However, the S&P500 Futures also show the risk-off mood has suffered minor losses. As it declines from its peak in August 2022. The same is driving the rise of the US Dollar Index (DXY) ahead of the May US Factory Orders and ISM Services PMI.

Above all, recent dovish concerns about the RBA, particularly in light of previously disappointing Aussie inflation data and the Reserve Bank of New Zealand’s (RBNZ) policies, keep AUDUSD bears optimistic.

AUDUSD Technical Outlook

The AUDUSD is still struggling to rebound below the 200-EMA at 0.6630.