AUD/USD looks set to regain 0.6700 despite mixed China data, PBOC inaction

• AUD/USD extends bounce off intraday low after China data, PBOC news.
• China Industrial Production, Retail Sales improved in February, PBOC keeps one-year MLF unchanged.
• Market sentiment stays dicey amid mixed signals surrounding Fed and Silicon Valley Bank (SVB) fallout risks.
• US Retail Sales, Australia employment figures eyed for clear directions.

AUD/USD picks up bids to extend the recovery from intraday low towards 0.6700 even as markets remain dicey Australia’s biggest customer, namely China, prints mixed data during early Wednesday.

That said, China’s Industrial Production 2.4% versus 2.6% expected and 1.3% prior whereas the Retail Sales matches 3.5% forecasts compared to -1.8% prior. Earlier in the day, the People’s Bank of China (PBOC) held its one-year benchmark rate, namely the one-year Medium-term Lending Facility (MLF) rate, unchanged at 2.75%.

Also read: China’s Jan-Feb Retail Sales jump 3.5%, Industrial Output grows 2.4%

Apart from the data, the market’s mixed feelings surrounding the risks emanating from the latest fallouts of the SVB and Signature Bank also seem to challenge AUD/USD buyers. That said, US Senate Banking Committee Chairman Sherrod Brown and Federal Reserve Governor Michelle Bowman ruled out chatters suggesting the grim conditions of the US banking industry late Tuesday. However, Wall Street Journal (WSJ) reported that a raft of tougher capital and liquidity requirements are under review, as well as steps to beef up annual “stress tests” that assess banks’ ability to weather a hypothetical recession, according to a person familiar with the latest thinking among U.S. regulators.

On a different page, recently increasing optimism for the US Federal Reserve’s (Fed) 0.25% rate hike in March should have prod the AUD/USD bulls but could not.

On Tuesday, the US Consumer Price Index (CPI) and CPI ex Food and Energy both matched 6.0% and 5.5% YoY market forecasts, versus 6.4% and 5.6% respective previous readings. “The Federal Reserve is seen raising its benchmark rate a quarter of a percentage point next week and again in May, as a government report showed U.S. inflation remained high in February, and concerns of a long-lasting banking crisis eased,” said Reuters following the US inflation data release. At home, downbeat Aussie Westpac Consumer Confidence for March and softer prints of the National Australia Bank’s sentiment data for February, published the previous day, keep the AUD/USD bears hopeful.

Against this backdrop, S&P 500 Futures remain sidelined despite Wall Street’s upbeat closing. Further, the US 10-year Treasury bond yields grind near 3.68% by the press time, after posting the biggest daily gain in five weeks the previous day, while the two-year bond coupons extend the previous day’s recovery from the six-month low to 4.31% at the latest.

Looking ahead, US Retail Sales for February, expected -0.3% MoM versus 3.0% prior, will be important for intraday directions. However, major attention will be given to Thursday’s Australia jobs report for February and the Reserve Bank of Australia (RBA) Bulletin for the fourth quarter (Q4).

Technical analysis

A six-week-old descending resistance line, around 0.6700 by the press time, joins sluggish RSI (14) and indecisive MACD signals to challenge the AUD/USD pair buyers.