AUD/USD: A shade lighter than 0.7000 ahead of China inflation, US-China trade talks

• China inflation numbers could offer intermediate moves ahead of shifting focus to the US-China trade discussion.
• The latest threat from the US President Donald Trump has negatively affected chances of a successful trade deal.

The AUD/USD pair is mildly bid towards 0.7000 round-figure during the early Asian session on Thursday. The Aussie traders remain cautious ahead of the key US-China trade talks and China’s headline inflation numbers.

Soft figures of China’s trade balance numbers and the on-going rift between the US and China ahead of the much-awaited trade deal discussion portrayed the quote’s losses on yesterday.

Commodity traders may first observe China’s consumer price index (CPI) and producer price index (PPI) for April in order to get fresh impulse ahead of the US and Chinese lawmakers’ meet.
China’s CPI bears the consensus to rise from 2.3% to 2.5% while PPI might increase from 0.4% to 0.6% on YoY basis.

With the US President’s tariff threat to China offering a bump to previously smooth-running trade talks between the world’s two largest economies, China has also started using tough language ahead of their Vice Premier Liu He’s Washington visit. The trade meeting was earlier scheduled for two days but is now likely to be cut short due to the latest developments as said by the South China Morning Post.

As China is Australia’s largest customer, any negative news for the dragon nation could weigh on the Aussie.

The US has already threatened to increase tariffs on $200 billion worth of Chinese goods from 10% to 25% and bring another $325 billion goods under the umbrella if China fails to arrive with an acceptable trade deal by Friday.

Additionally, expected improvement in the US PPI and initial jobless claims will confront likely increase of the trade deficit while the Federal Reserve Chairman Jerome Powell’s speech will also be followed closely for any sign of future monetary policy change.

Technical Analysis

Sustained price break above 0.7000 could help buyers to aim for 0.7055 and April highs near 0.7070 while 100-day and 200-day simple moving averages (SMA), at 0.7110 and 0.7170 respectively, could entertain bulls then after.

On the contrary, unless breaking 0.6980 and 0.6960 supports, the quote is less likely to decline further in the direction to 0.6920 and January 2016 low around 0.6820.