AUD/USD: Corrective drop targets 0.6900 ahead of China data and Fed meeting minutes

AUD/USD receives offers to pare recent losses around a five-week bottom, reviving intraday high to 0.6890 during Wednesday's mid-Asian session. In doing so, the AUD/USD reflects the market's posture ahead of the Federal Open Market Committee (FOMC) while also supporting US stock futures with modest bids.

Nevertheless, US diplomats appear to disregard recent mixed factory-gate inflation statistics while tacitly pressuring the Fed toward rapid rate hikes and balance sheet normalization. The same information regarding Taiwan's and China's covid conditions impact on market mood, which in turn challenges AUD/USD bulls due to the prominence of the pair as a risk barometer.

In interviews with CNN and Bloomberg, respectively, White House (WH) Economic Adviser Brian Deese and National Economic Council (NEC) Deputy Director Bharat Ramamurti underlined inflation woes and demonstrated a willingness to combat them.

The previous day, Beijing reported the largest number of coronavirus cases in three weeks and recommended for more activity limits. Shanghai, on the other hand, has seen a decline in the number of COVID-19 cases but has maintained the newly announced restrictions to prevent the virus from spreading too rapidly.

In addition, the US Producer Price Index (PPI) for May met estimates of 0.8 percent MoM, although falling to 10.8 percent YoY versus 10.9 percent predicted and previous readings. The PPI excluding Food and Energy, often known as Core PPI, fell below the 8.6 percent YoY projection to 8.3 percent.

Goldman Sachs (GS) Chief Australia Economist Andrew Boak's remarks also helped the AUD/USD recover. "We now anticipate that the RBA will hike interest rates by 50 basis points in August and September, up from 25 basis points previously," said Boak from GS.

In addition, the announcement that Australia's minimum wage will be boosted by 5.2% following the review appears to have aided the pair's recent recovery. The new minimum wage will increase by $40 per week, according to Reuters.

US stock futures continue sluggish near the lowest levels since early 2021, up 0.20 percent intraday as of late, as Treasury bond yields stagnate near the 11-year high above 3.5 percent, about 3.475 percent as of late.

Australia's Westpac Consumer Confidence Index for June, predicted to be -0.7 percent versus -5.6 percent previously, might provide immediate direction for the AUD/USD pair before China's Industrial Production and Retail Sales for May. On the other hand, a great deal of focus will be placed on the Fed's capacity to contain inflation without disappointing the markets.

Technical Evaluation

Bears require a decisive break below the annual low of 0.6830, marked in May, to target a June 2020 low under 0.6775. Alternately, recovery advances require confirmation from the bottom of 2021 near 0.7000.