AUD/JPY witness pullback to 76.80 on upbeat China inflation, trade talks in the spotlight

• China’s CPI matched positive forecasts while PPI crossed the expectations to the upside.
• Result of the trade negotiations between the US and China will be followed for now.

AUD/JPY witnessed pullback to 76.80 during early Thursday after China released upbeat prints of monthly CPI and PPI data.

China’s April month inflation figures portrayed an overall upbeat scenario with the consumer price index (CPI) (YoY) matching 2.5% forecast over 2.3% prior whereas producer price index (PPI) beating 0.6% consensus with +0.9% mark and also breaking 0.4% prior. Further, monthly CPI data also matched market expectations of 0.1% growth against -0.4% contraction.

During initial Thursday, the US President Donald Trump crossed the wires while speaking at a rally. Mr. Trump already told China “broke the deal” in trade talks.  

It should also be noted that the US and Iran are also on the crossroads and the Trump administration recently announced a ban on trading metals with Iran. As a result, the Middle East nation might retaliate and can increase the pressure of risk aversion.

Risk tone was also heavy after yesterday’s recovery failed to carry considering the latest challenges to the US-China trade deal. The global barometer for risk sentiment, 10-year yields on the US bonds, dropped nearly two basis points to 2.465%.

However, China’s Vice Premier Liu He is still on his way to trade negotiation table with the US lawmakers and may offer surprises to the global market players.

Having witnessed initial reaction to China’s headline inflation numbers, traders may now turn to developments at Washington for fresh clues.

Technical Analysis

The 77.45/55 area comprising a horizontal-line connecting low since mid-January and a descending trend-line since April 18 seem tough resistance on the upside, a break of which can recall 78.20 and 100-day simple moving average (SMA) around 78.65.

Meanwhile, 76.00 can offer nearby support ahead of 75.30 that can further drive the prices down towards 74.50 and June 2016 bottom near 72.40.