• AUD/USD steadies after reversing from five-month high, inactive of late.
• Market sentiment remains dicey amid US holiday, cautious mood ahead of key data from China, Australia.
• China Q4 GDP bears downbeat forecasts, can help extend AUD/USD pullback in case of softer prints from Australia’s biggest customer.

AUD/USD remains sidelined around 0.6955 after retreating from the highest levels since August 2022 during Tuesday’s sluggish Asian session. In doing so, the Aussie pair portrays the market’s anxiety ahead of the key China Gross Domestic Product (GDP) for the fourth quarter (Q4), as well as some second-tier data from Australia, not to forget mixed concerns surrounding the US “soft landing,” and the Fed’s policy pivot.

The Aussie pair began the week on a negative note by snapping a three-day uptrend around the multi-day top. The underlying reason could be linked to the market’s reassessments of the dovish bias about the Federal Reserve (Fed), especially after Friday’s upbeat prints of the Michigan Consumer Sentiment Index (CSI) and 5-year inflation expectations. However, Martin Luther King’s Birthday restricted the market’s moves.

Even so, a sustained rebound in the US Treasury bond yields underpinned the US Dollar Index (DXY) recovery from the lowest levels since June 2022, which in turn probed the AUD/USD traders even as the equities were mildly positive.

Also likely to have challenged the AUD/USD bulls could be the easing in Australia’s TD Securities Inflation for December, 0.2% MoM versus 1.0% prior.

Furthermore, China’s reopening boosts AUD/USD considering the strong ties between Canberra and Beijing. However, the lack of easing in Beijing’s Covid numbers and geopolitical tensions with the US, mainly surrounding Taiwan, seems to challenge China-linked optimism and the Aussie pair of late.

Above all, anxiety ahead of the key data from major customer China and the US Retail Sales for December, expected 0.1% YoY versus -0.6% prior, scheduled for release on Wednesday, weigh on the AUD/USD prices of late.

To sum up, AUD/USD traders should pay attention to China Q4 GDP, expected -0.8% QoQ versus 3.9% prior, for fresh impulse but major attention will be given to the US Retail Sales and Australia’s employment data for December, up for publishing on Thursday.

Technical analysis

Nearly overbought conditions of the RSI (14) join the AUD/USD pair’s U-turn from a two-month-old ascending resistance line, close to 0.7025 at the latest, to tease the Aussie pair sellers. It’s worth noting, however, that, a daily closing below the 200-DMA, around 0.6825 at the latest, becomes necessary for the AUD/USD bears to retake control.