AUD/USD retreats towards 0.6700 on downbeat Aussie trade data, focus on RBA’s Lowe, Fed’s Powell

• AUD/USD reverses the previous day’s corrective pullback after downbeat Aussie trade data.
• Aussie Trade Balance eased in July, risk aversion remains in play.
• Anxiety ahead of ECB, speech from Fed Chair Powell recalls the US dollar bulls despite sluggish yields.
• Hawkish Fed bets, recently firmer US data keep bears hopeful even as Powell’s ability to defend rate hikes faces test.

AUD/USD takes offers to refresh intraday low around 0.6740 after downbeat Aussie trade numbers joined the US dollar rebound during early Thursday. Also exerting pressure on the pair is the cautious mood before the key catalysts up for publishing from Europe and the US.

Australia’s Trade Balance dropped to 8,733M in July versus 14,500 M market forecasts and 17,670 prior. Further details suggest that the Imports jumped by 5.2% compared to 0.7% prior while Exports slumped with the -9.9% figures versus 5.1% previous readings.

Even so, the Aussie pair remains pressured amid general anxiety ahead of the week’s key events, namely the monetary policy meeting by the European Central Bank (ECB) and Fed Chair Jerome Powell’s speech.

Also challenging the AUD/USD buyers are the fresh covid fears emanating from China, Australia’s biggest customer as the South China Morning Post (SCMP) said, “Shenzhen reduces entry quota for Hong Kong travelers.”

Previously, firmer data from the key economies and optimistic statements from the Fed’s Beige Book seemed to have triggered the risk barometer pair’s rebound from the lowest levels since mid-July, which is also the yearly low.

Furthermore, mixed comments from the Fed policymakers also might have favored the AUD/USD rebound the previous day. That said, Fed Vice Chair Lael Brainard reiterated on Wednesday that the Fed's policy rate will need to rise further and that they will need to keep the policy restrictive 'for some time,' as reported by Reuters. On the other hand, Cleveland Federal Reserve Bank President Loretta Mester said, "I will decide my preferred size of rate hike at the September meeting itself."

While portraying the mood, US 10-year Treasury yields pause Wednesday’s downside by taking rounds to 3.27%, after taking a U-turn from the highest levels since mid-June. On the other hand, S&P 500 Futures fade bounced off the lowest levels since July 19 as it seesawed around 3,980 by the press time.

Looking forward, a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe and the art of Fed Chair Powell’s defense of the aggressive rate hikes will be at test during today’s speech.

Also read: ECB Preview: Between Putin's rock and hard inflationary place, the deck is stacked against the euro

Technical analysis

A convergence of the one-week-old resistance line and 78.6% Fibonacci retracement level of July-August upside, near 0.6780, restricts short-term AUD/USD rebound.