AUD/USD consolidates Friday’s losses above 0.7100 after upbeat China inflation data

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  • AUD/USD stays mildly positive following China’s CPI, PPI for July.
  • Market sentiment struggles for a clear direction as stimulus hopes confront Sino-American tussle, virus woes.
  • A light calendar keeps risk catalysts on the driver’s seat.

AUD/USD attacks intraday high of 0.7170, up 0.12% on a day, during the early Monday. The Aussie pair dropped on Friday amid the broad US dollar strength. However, the recent shift in the market’s mood joins upbeat inflation numbers from China to challenge the bears.

Read: Chinese CPI higher than expected, 2.7% vs 2.6%

Earlier during the day, market sentiment recovered as US President Donald Trump said, “Democrats have called and want to get together.” The statement rekindled hopes of further stimulus that dies after policymakers called an off to any negotiations during the last week. Also likely to have pushed the Democrats for a talk and favored market sentiment could be President Trump’s signing of four executive orders to release unemployment claim benefits, help with student loans and aid for those living in a rented house.

On the contrary, downbeat updates concerning the US-China tension and the coronavirus (COVID-19) keeps challenging the risk-tone sentiment. Having turned off the business tap for China’s TikTok and WeChat, as well as sanctioning the Hong Kong Leader Carry Liam, the American policymakers are alleging Beijing for its suspected meddling in the US Presidential elections. Reuters came out with the news, quoting White House National Security Adviser Robert O’Brien, “Chinese government-linked hackers have been targeting US election infrastructure ahead of the 2020 presidential election.”

Talking about the virus, Australia’s second-most populous state, also the epicenter of the pandemic, Victoria, marks the biggest single-day jump in deaths due to the COVID-19. As per the ABC News published before a few minutes, “Australia’s coronavirus death toll hits 314 as Victoria announces a daily record of 19 deaths and 322 new cases in the past 24 hours.”

Against this backdrop, S&P 500 Futures fails to mark any clear direction while stocks in Australia and New Zealand stay mildly positive. Further, the US 10-year Treasury yields refrain from moving as Japanese traders are off due to Mountain Day.

Having witnessed the initial reaction to the key Chinese data, markets may jump back to macros for fresh impulse. The reason is the lack of major data/events on the calendar as well as the present dominance of qualitative factors.

Technical analysis

While 0.7200 and 0.7240 restrict the pair’s immediate upside, an ascending trend line from May 22, at 0.7115 now, followed by 0.7105-7100 area comprising 21-day EMA and 0.7100 round-figures, limit the quote’s short-term declines.

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