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  • AUD/USD is struggling to beat the descending 5-day moving average (MA) hurdle. The focus is on today’s close.  
  • China data released over the weekend showed the PPI is dangerously close to falling back into deflation.  That could lead to risk aversion and reduced demand for the AUD.  

AUD/USD pair is mildly bid at press time, having faced rejection at the 5-day MA, currently at 0.7042, a few minutes ago.  

The currency pair created a bullish outside-day on Friday, which is widely considered an early warning of a potential bullish reversal. The trend change, however, would be confirmed if the pair closes today above Friday’s high of 0.7052.  

The bullish close may remain elusive if risk aversion intensifies with China deflation scare.  

The data released over the weekend showed the producer price inflation (PPI) in the world’s second-largest economy edged up at an annualized rate of 0.1 percent in February, missing expectations of a jump to 0.2 percent. The factory-gate inflation is dangerously close to falling into the negative territory (deflation).  

Consumer price index (CPI) rose 1.5 percent from a year earlier – the lowest inflation since January 2018 and down from 1.7 percent in January.  

Despite the dismal inflation readings, the Chinese stocks are trading in the green today.  As of writing, the Shanghai Composite index is up 0.32 percent. Other major Asian indices like Nikkei and Hang Seng are also reporting moderate gains.  

The AUD could challenge Friday’s high of 0.7052 if Asian stocks remain bid and the European and US equities follow suit.  

Technical Levels