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   “¢   Softer Chinese inflation data-led early weakness turned out to be rather short-lived.
   “¢   US-China trade optimism/bullish commodities underpin Aussie and remain supportive.
   “¢   Traders now eye second-tier US economic data for some short-term trading impetus.

The AUD/USD pair managed to recover early lost ground, led by softer Chinese inflation data and is currently placed at fresh session tops, around the 0.7110-15 region.

China’s January Consumer Price Index and Producer Price Index both missed expectations, reinforcing concerns over the global economic slowdown. This coupled with some renewed US Dollar buying interest exerted some initial downward pressure and dragged the pair to an intraday low level of 0.7079.

Meanwhile, some optimistic trade-related comments by China’s President Xi Jinping further fueled the recent optimism over a possible resolution of trade disputes between the world’s two largest economies and provided a minor boost to the China-proxy Australian Dollar.

Speaking after meeting US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, Xi said that the US and China have made new progress on significant issues during the talks in Beijing and negotiations will resume next week in Washington.

Adding to this, the prevalent risk-on mood and a bullish sentiment around commodity space, especially copper, further underpinned demand for the commodity-linked Aussie and remained supportive of the pair’s goodish intraday bounce of around 30-35 pips.  

It, however, remains to be seen if the pair is able to build on the up-move or continues with its struggle to make it through the 0.7130-35 supply zone, or weekly tops. Market participants now look forward to second-tier US economic releases for some short-term trading opportunities.

Technical levels to watch

On a sustained move beyond the mentioned barrier, the pair is likely to aim towards reclaiming the 0.7200 handle with some intermediate hurdle near the 0.7175-80 region. On the flip side, the 0.7080-70 region now seems to have emerged as immediate strong support, which if broken might turn the pair vulnerable to accelerate the fall further towards challenging the key 0.70 psychological mark.