• AUD/USD holds lower ground at the lowest levels in six weeks marked the previous day.
• Risk-aversion, pessimism surrounding key customer China join downbeat data at home to weigh on prices.
• Hawkish Fed, recession woes keep bears hopeful ahead of top-tier statistics.

AUD/USD begins September month’s trading while keeping the two-day downtrend at the 1.5-month low, taking rounds to 0.6840 by the press time. In doing so, the Aussie pair justifies the market’s risk-off mood, as well as concerns surrounding Australia’s biggest customer China. Also keeping the quote pressured are the latest statistics from Australia.

Recently, Australia’s AiG Performance of Manufacturing Index marked the first activity contraction in seven months with 49.3 numbers for August, versus 52.5 prior. The same follows Wednesday’s second quarter (Q2) Construction Work Done that dropped to -3.8% versus 0.9% market forecasts and -0.9% prior. Further, Aussie Private Sector Credit eased in July to 0.7% MoM from 0.9% prior while staying intact at 9.1% YoY.

It should be noted that the US data wasn’t either too positive but could manage to keep the greenback buyers hopeful amid the recently loose links between ADP and Nonfarm Payrolls (NFP). That said, US ADP Employment Change rose by 132K versus 288K expected and 270K prior. However, the average wage increases in the US in August were 7.6% y/y and the same kept the Fed policymakers hawkish.

Following the data, Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday that she was not anticipating the Fed to cut rates next year, as reported by Reuters.

On a different page, Taiwan’s first shooting at a Chinese drone and more virus-led lockdown on the dragon nation joined the second month of manufacturing activity contraction in China, per NBS Manufacturing PMI, to weigh on the AUD/USD prices, as well as risk appetite. On the same line was the latest statement from the United Nations (UN) Human Resource Office mentioning that the Chinese government has committed ‘serious human rights violations’ in Xinjiang.

Against this backdrop, Wall Street closed with losses while the US 10-year Treasury yields rose the most in two weeks while rising to the highest level since late June.

Looking forward, China’s Caixin Manufacturing PMI for August and the US ISM Manufacturing PMI could decorate the calendar before highlighting Friday’s US NFP. It should be observed that the pair’s downside appears to lose steam of late, which in turn could trigger the corrective pullback of the pair in case of positive surprise from China statistics and/or risk catalysts.

Technical analysis

May’s low near 0.6830 appears immediate support, a break of which could direct AUD/USD bears towards early July’s bottom around 0.6760. Alternatively, a downward sloping support-turned-resistance line from early August, close to 0.6850, probes corrective pullback ahead of the 50-DMA hurdle of 0.6910.