AUD/USD climbs to session tops, recovers part of overnight slump

   “¢   Consolidative USD price-action prompts some short-covering move.  
   “¢   Gains likely to remain limited amid escalating US-China trade tensions.
   “¢   Today’s key focus would be on the US consumer inflation figures.  

The AUD/USD pair caught some bids on Thursday and recovered a part of the overnight slump to multi-day lows, led by escalating trade tensions.  

The US-China trade conflict escalated further on Wednesday after the US threatened to levy tariffs on around $200 billion worth of Chinese imports, which prompted some aggressive selling around the China-proxy Australian Dollar.

Meanwhile, the latest US PPI print, showing that the wholesale cost of goods and services rose at the fastest yearly rate in almost seven years, provided an additional boost to the already stronger US Dollar and aggravated the selling pressure around the major.

With the USD consolidating overnight gains, a slight improvement in the global risk appetite helped ease the bearish pressure and prompted some short-covering move, especially after a sharp decline of around 120-pips in just two-trading sessions.

Further gains, however, are likely to remain capped ahead of today’s key release of the US consumer inflation figures, expected to show a 2.9% y/y rise in June. Should the data support views of rising inflationary pressure in the US economy, it would reaffirm a gradual Fed monetary policy tightening cycle through 2018 and attract some fresh selling.

Technical levels to watch

Immediate resistance is pegged near the 0.7400 handle, above which the up-move could get extended back towards the 0.7440 supply zone. On the flip side, sustained weakness below 0.7365-60 immediate support might turn the pair vulnerable to head back towards 0.7335 horizontal zone en-route YTD lows near the 0.7315-10 region.