AUD/USD bulls approach 0.6700 on China-linked optimism, US data eyed

• AUD/USD picks up bids to refresh intraday high, pares the biggest daily loss in over a week.
• PBOC’s biggest weekly cash injections in two months, Evergrande linked news trigger market’s optimism.
• Year-end holiday season, cautious mood ahead of US PCE Price Index, Durable Goods Orders probe buyers.
• Pair sellers need validation from Fed’s preferred inflation gauge.

AUD/USD bulls are back to the table and approach the 0.6700 threshold as they pick up bids to refresh intraday top near 0.6690 during early Friday. In doing so, the Aussie pair justifies its risk barometer status while ignoring downbeat data at home, as well as the market’s anxiety ahead of the key US data.

That said, the market’s latest optimism could be linked to the news suggesting optimism over China’s pro-growth policies as the People’s Bank of China (PBOC) marked the biggest weekly cash injection in two months. The same joins the chatters surrounding Evergrande’s nearness to an offshore debt restructuring plan to underpin the firmer sentiment.

However, recently increasing hawkish Fed bets, especially after Thursday’s upbeat US data, join a rally in Shanghai’s hospitalization and challenges to China’s medical system, due to the latest easing of the Zero-Covid policy, to probe the risk-on mood.

Amid these plays, S&P 500 Futures print mild gains while ignoring the Wall Street benchmarks. Further, the US 10-year Treasury bond yields extend the previous day’s rebound near the one-month high, marked early in the week.

It’s worth noting that Australia’s Private Sector Credit eased in November to 0.5% MoM and 8.9% YoY versus 0.6% and 9.5% in that order. Further, the Housing Credit remained unchanged at 0.4% MoM.

On the other hand, the US economy expanded at an annualized rate of 3.2% in the third quarter (Q3), per the final readings of the Gross Domestic Product (GDP), versus 2.9% previous estimates. Further, the Personal Consumption Expenditure (PCE) Prices match 4.3% QoQ estimations during Q3 2022 whereas the Core PCE improved to 4.7% QoQ versus 4.6% market forecasts.

Moving on, the mixed sentiment in the market and holiday mood could test AUD/USD buyers as they approach the US Core Personal Consumption Expenditure (PCE) - Price Index, the Federal Reserve’s preferred inflation gauge, as well as Durable Goods Orders, for November.

As per the market consensus, the US Core PCE Price Index remains unchanged at 0.2% MoM. However, the Annualized forecasts suggest softer figures of 4.7% YoY versus 5.0% previous readings. Further, US Durable Goods Orders could register a contraction of 0.6% in November compared to the previous increase of 1.1% (revised from 1.0%).

Also read: Pre-Christmas US Data Preview: Core PCE and Durable Goods may extend US Dollar retreat

Technical analysis

AUD/USD rebound aims for the area comprising the 50-HMA and the 100-HMA, around 0.6700. However, the quote’s further upside appears difficult amid sluggish MACD signals. Alternatively, an upward-sloping support line stretched from Tuesday restricts the immediate downside of the Aussie pair near 0.6665.