AUD/USD Traders Retain Bullish Bias Near 0.6650; Risk Appetite, Fed Minutes on the Horizon

AUD/USD is slightly bid around 0.6655-50 in the early hours of Wednesday, maintaining the previous day's bounce from a two-week-old support despite conflicting market sentiment. The latest inactivity in the AUD/USD pair reflects hesitation among pair traders ahead of crucial US activity data for November, as well as a cautious outlook ahead of the Federal Open Market Committee (FOMC) Meeting Minutes and the US Durable Goods Orders for October.

In the meantime, the coronavirus situation in China continues to deteriorate as daily instances approach the record high set in April and Chengdu announces mass COVID-19 testing for its citizens from November 23 to 27. On November 22, local government agencies in Beijing reported 388 symptomatic new locally transmitted COVID-19 infections and 1,098 asymptomatic cases, as reported by Reuters.

Aside from the weaker Aussie PMIs for November, the AUD/USD bulls were bolstered by expectations of a rapprochement with China, as well as by the recent strengthening of equities and decline in US Treasury yields.

The Australian Financial Review (AFR) reported, "Defence Minister Richard Marles said China's readiness to reengage was expressed during a bilateral meeting on Tuesday with his Chinese counterpart General Wei Fenghe, their first since the Shangri La discussions in Singapore in June."

On a different page, the Richmond Fed Manufacturing Index improved from -10 to -9 in November, while Kansas City Federal Reserve President Esther George recently stated, "We may need a higher interest rate for some time to convince families to maintain their savings." Earlier in the day, Australia's S&P Global Manufacturing PMI decreased to 51.5 from 52.7 and 52.4, respectively, while the Services PMI decreased to 47.2 from 49.3 and 49.4 respectively.

In this context, European and British markets, as well as Wall Street, closed higher, while 10-year US Treasury yields declined six basis points (bps) to 3.76 percent. However, benchmark bond rates remain largely steady near 3.75 percent, while S&P 500 Futures struggle to find obvious direction near 4,011.

To assess the short-term direction of AUD/USD, traders will look for more confirmed economic transition indications and the Fed's 50 basis point (bps) rate hike in December. Despite this, early November PMI readings. In addition, the Federal Open Market Committee (FOMC) Meeting Minutes and US Durable Goods Orders for October will be crucial for establishing direction.

Despite the recent rebound from a two-week-old ascending support line, the AUD/USD bears remain optimistic as the monthly peak around 0.6800 challenges the upward momentum. Notably, the Relative Strength Index (RSI) at 14 joins the recently weaker signals from Moving Average Convergence and Divergence (MACD) to challenge AUD/USD buyers.