AUD/USD Consolidates Below 0.6900 Ahead of US PCE Data, Bulls Take Advantage Near YTD Top

• AUD/USD struggles for firm intraday direction amid mixed fundamentals.
• Optimism over China’s stimulus measures provides some support for the Aussie.
• Modest USD strength is capping spot prices ahead of the key US PCE price index.

The AUD/USD pair is oscillating in a narrow trading band below the 0.6900 level in the first half of the European session on Friday and remains close to the February 2023 high reached earlier this week.

The US Dollar (USD) is attracting some buyers ahead of the US Personal Consumption Expenditure (PCE) price index and is proving to be a key factor acting as a headwind for the AUD/USD pair. That said, bets on another excessive rate cut by the Federal Reserve (Fed) in November are preventing USD bulls from placing aggressive bets. Apart from that, the bullish market mood limits safe haven money and provides some support for the risk-sensitive Aussie.

Global risk sentiment gets a further boost after the People’s Bank of China (PBOC) cut the seven-day repo rate to 1.5% from 1.7% and cut the reserve requirement ratio (RRR) by 50 bps. This comes on top of a raft of stimulus measures announced this week that continue to fuel risk-on growth in global equity markets and support the Australian dollar (AUD) China proxy amid the Reserve Bank of Australia’s (RBA) dovish stance. .

In fact, Australia’s central bank reiterated on Tuesday that policy will need to be tight until confidence returns that inflation is moving sustainably towards the target range. In addition, RBA Governor Michele Bullock said recent data had not materially influenced the policy outlook. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the upside and supports the prospects for an extension of a two-week rally.