AUD/USD stays on the way to 0.7300 as RBA, US NFP week begins

• AUD/USD keeps the latest rebound, grinds higher, after four-month downtrend.
• Fresh fears for US-China tussles, worsening virus conditions join Fed tapering woes to challenge bulls cheering stimulus hopes.
• Upbeat data, gold price recovery underpinned corrective pullback but bears keep the driver seat.
• Partial off in Australia, China’s National Day Holiday joins a lighter calendar to test the momentum traders.

AUD/USD grinds higher past 0.7250, keeping the recent bounce, as Asia-Pacific traders kick-start the key week. That said, the Aussie pair picks up bids near 0.7265 by the press time even as markets in Australia witness regional holidays while China traders cheer national off.

The risk barometer pair benefited from a pullback in the US Dollar Index (DXY) as market players cheered the surprise passage of the bill to avoid the US government shutdown. Also favoring the mood were the optimistic comments by US President Joe Biden and House Speaker Nancy Pelosi suggesting the much-awaited infrastructure spending bill will be out soon.

It’s worth noting, however, that the recently worsening virus conditions in the US and Australia, not to forget New Zealand, challenge the AUD/USD buyers. After a surprise jump in Aussie national covid infections to 2,360 on October 02, the figures eased to 1,927 per Sunday’s release. New Zealand Prime Minister Jacinda Ardern will decide on Auckland’s virus-led alert level on Monday amid surging cases and a deadline to ease activity restrictions. “The US surpassed 700,000 coronavirus-related deaths on Friday as officials roll out booster doses of vaccines to protect the elderly and people working in high-risk professions,” said Reuters.

Moving on, the Fed’s preferred inflation gauge, namely the US Core PCE Inflation jumped to the highest level since 1991 and Michigan consumer confidence for September also got a positive revision. This helps the Fedspeak to keep the hawkish bias towards tapering while also holding the “no rate hike for now” view.

Other than the Fedspeak, stimulus and covid, challenges from China also probe the AUD/USD buyers. While Evergrande is on the top and highlights Beijing’s latest economic woes, joined by the power cut problems, the US criticism of China’s activities near Taiwan and performance on the Phase 1 deal question the optimists.

Amid these plays, US equities closed higher while the US Treasury yields and the DXY weighed down during the first day of October. However, the gold prices benefited and helped the Aussie traders to focus more on positives for short-covering moves on Friday.

Moving on, an absence of major data/events, as well as off in China and partial activity in Australia, will restrict short-term AUD/USD moves. Even so, the risk catalysts concerning China, COVID-19, the Fed and US stimulus will be crucial to watch for fresh impulse. Above all, this week’s Reserve Bank of Australia (RBA) Monetary Policy Meeting and the US Nonfarm Payrolls (NFP) will be a cornerstone for the pair even as the RBA policymakers have rejected plans for any action and the Fed is good to witness softer data.

Read: AUD/USD Weekly Forecast: Limited buying interest exposes the critical 0.7000 threshold

Technical analysis

AUD/USD holds onto the U-turn from 78.6% Fibonacci retracement of August-September run-up, around 0.7170. Though, 20-day EMA and a descending resistance line from September 07, respectively around 0.7275-80, becomes a nearly important hurdle to watch.