AUD/USD consolidating after Chinese PMI-led slump to 2-week lows

The AUD/USD pair faded strong Australian retail sales data-led bullish spike beyond mid-0.7400s and tumbled to fresh two-week lows. The pair bounced off few pips from lows and now seems to have stabilized around the 0.7400 handle.

The pair jumped to session tops on stronger-than-expected Australian retail sales growth of 1.0% in April. Upbeat retail sales figures to some extend negated disappointing private capex figures for the first quarter of 2017, showing a growth of 0.3% as against 0.8% expected.

Spot, however, came under intense selling pressure after Chinese Caixin manufacturing PMI for May dropped into contraction territory, hitting 11-month low level of 49.6. Softer manufacturing data from the world's second largest economy weighed heavily on the China-proxy Australian Dollar. 

Adding to this, a sharp recovery in the US treasury bond yields, and weaker copper prices, further dented demand for higher-yielding / commodity-linked currencies - like the Aussie. 

The selling pressure now seems to have abated and the pair seems to have moved into a bearish consolidation phase as focus now shifts to a busy US economic docket, featuring the release of ADP report on private sector employment, weekly jobless claims and ISM manufacturing PMI.

Today's labor market data would drive market expectations for Friday's official jobs report (NFP), which could act as a catalyst for the pair's next leg of directional move.

Technical levels to watch

A follow through weakness below 0.7385 level is likely to get extended towards a major support near 0.7340 region, below which the pair seems move likely to head towards testing sub-0.7300 level (0.7280 support area). On the upside, any recovery move now seems to confront immediate resistance near 0.7430 level, above which a bout of short-covering could lift the pair beyond session tops resistance near 0.7455 level towards 0.7475 important hurdle.