AUD/USD keeps gains after dismal China PMI

• AUD/USD regains some poise after falling 300 pips over the previous two trading days. 
• China's Caixin Manufacturing PMI misses estimates, barely holds above 50.
• RBA intervenes in bond markets, saves the day for the AUD bulls.

AUD/USD trades at session highs above 0.7750 even as key data released soon before press time shows China's manufacturing sector barely expanded in February. 

The Caixin China Manufacturing PMI, which focuses on small and medium-sized export-oriented units, fell to 50.9 in February from January's 51.5, missing expectations for 51.4. A reading above 50 indicates expansion. As such, a decline to 50.9 indicates a slowdown in the pace of expansion in the activity. 

So far, however, the China-sensitive AUD has remained resilient to below-forecast Caixin PMI. Helping the AUD/USD stay bid on Monday is the Reserve Bank of Australia's aggressive intervention in the bond markets. 

The central bank purchased bonds worth $4 billion early Monday – that's twice the amount of its regular purchases – in a bid to put brakes on the rising bond yields. That has pushed the Aussie 10-year bond yield lower by nearly 25 basis points to 1.65%. 

However, the yield could reclaim the highs seen Friday if the US Treasury yields continue to rise, pricing prospects of an early Federal Reseve tightening. 

The Fed funds futures are now fully priced for a 25 basis point rate hike by January 2023.

Bond yields in Australia and other parts of the world surged last week, tracking the rally in the longer duration US bond yields, triggering risk aversion in the stock markets. The dour mood drew haven bids for the US dollar. The AUD/USD pair fell by 300 pips to 0.77 in the previous two trading days. 

Technical levels