AUD/USD bounce off six-month low towards 0.6550 on US Dollar’s retreat, ignores Aussie data

• AUD/USD renews intraday top as it reverses from the yearly low, snaps three-day downtrend.
• Australia Retail Sales’ growth stagnates in April versus 0.4% prior.
• US Dollar bulls step back from key resistance line amid mixed concerns about debt ceiling, unimpressive Fed talks.
• US Durable Goods Orders, Fed’s preferred inflation gauge eyed, US default updates are critical.

AUD/USD prints the first daily gain in four as it rebounds from the yearly low to 0.6515 heading into Friday’s European session. In doing so, the Aussie pair pays little heed to the downbeat Australian data while cheering the US Dollar’s pullback.

Australia's Retail Sales growth dropped to 0.0% in April versus 0.2% market forecasts and 0.4% prior.

It should be noted that the US Dollar Index (DXY) retreats from a 2.5-month high to 104.17 by the press time as US policymakers’ inability to clinch a deal on the US debt ceiling extension contrasts with the chatters suggesting a $70.0 billion gap left to be filled by the negotiators to get the much-awaited deal. Recently, US House Speaker Kevin McCarthy announced no agreement on the debt deal, as well as the continuation of talks by saying, “It’s hard. But we’re working and we’re going to continue to work until we get this done.”

An impressive tone of the Federal Reserve (Fed) officials, despite upbeat US data, prods the US Dollar bulls ahead of another round of key statistics.

On a different page, China’s FX intervention and slightly positive mood in the Asia-Pacific region, despite doubts about the Reserve Bank of Australia’s (RBA) hawkish moves, also underpin the AUD/USD pair’s corrective bounce.

That said, the second estimation of the US Annualized Gross Domestic Product (GDP) for Q1 2023 was revised up to 1.3% versus 1.0% first forecasts. Further, the Chicago Fed National Activity Index for April improved to 0.07 from -0.37 prior and -0.02 market estimations. On the same line, Kansad Fed Manufacturing Activity improved to -2 for May compared to -21 previous readings and analysts’ estimations of -11. It’s worth noting that the US Pending Home Sales for April improved on YoY but eased on MoM whereas Core Personal Consumption Expenditures also rose to 5.0% during the preliminary readings versus 4.9% prior.

Following the data, Richmond Fed President Thomas Barkin said, “Fed is in a test and learn situation to determine how slowing demand lowers inflation.” On the different front, Boston Federal Reserve President Susan Collins said on Thursday that the Fed "may be at or near" the time to pause interest rate increases, as reported by Reuters.

Against this backdrop, the US stock futures print mild losses while the Asia-Pacific equities edge higher. Further, the US Treasury bond yields retreat from the multi-day top.

Looking ahead, market sentiment dwindles and allows traders to brace for the key data including the US Durable Goods Orders for April and the Core Personal Consumption Expenditure (PCE) Price Index for the said month, known as the Fed’s preferred inflation gauge.

Technical analysis

A downward-sloping support line from December 2022, close to 0.6495 at the latest, puts a floor under the AUD/USD prices amid an oversold RSI (14). The pair’s recovery, however, remains elusive unless crossing March’s low of around 0.6565.