Dollar-Australian retracement targets 0.6900 ahead of China data and minutes of Fed meeting

On Wednesday's mid-Asian session, AUD/USD rose to an intraday high of 0.6890 after receiving bids to pare recent losses around a five-week bottom. A moderate bid for US stock futures helps support the AUD/USD in light of the market's stance ahead of the Federal Open Market Committee (FOMC).

Nevertheless, US diplomats continue to dismiss recent mixed factory-gate inflation numbers while indirectly urging the Fed toward quick rate hikes and balance sheet normalization. Market sentiment is impacted by the same information on the covid conditions in Taiwan and China, which challenges the AUD/USD bulls because the pair is prominent as a risk barometer.

White House (WH) Economic Adviser Brian Deese and National Economic Council (NEC) Deputy Director Bharat Ramamurti both spoke out against rising inflation in interviews with CNN and Bloomberg, respectively.

Beijing had recorded the highest number of coronavirus cases in three weeks the day before and suggested even stricter activity restrictions. Shanghai, on the other hand, has experienced a reduction in the number of COVID-19 cases but has maintained the previously stated limitations to prevent the virus from spreading too rapidly.

The US Producer Price Index (PPI) for May came in at the expected 0.8% MoM, but fell to 10.8% YoY from 10.9 percent forecast and previous readings. Core PPI, which excludes food and energy from the PPI calculation, decreased from 8.6% to 8.3% YoY.

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

Another factor that may have benefited Australia's recent recovery is the declaration that the country's minimum wage will be raised by 5.2% as a result of the review. According to Reuters, the new weekly minimum wage is set to rise by $40.

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

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

In-Depth Analysis

Bears require a convincing break below the annual low of 0.6830, marked in May, to aim a June 2020 low of 0.6775. A recovery advance requires confirmation from the bottom of 2021 near 0.7001, on the other hand.