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  • The Aussie drops nearly 25-pips as the retreat extends on mixed China’s inflation.    
  • RBA’s warning on excessive lending risks adds to the weight on AUD/USD.
  • US dollar holds the lower ground amid dovish Powell, ahead of US PPI data.

AUD/USD is trading under pressure below 0.7650, having turned south from daily highs of 0.7661 on mixed Chinese inflation figures and a cautious tone seen in the RBA’s Financial Stability Report (FSR).

The annualized Chinese Consumer Price Index (CPI) and Producers Price Index (PPI) outpaced expectations. However, the monthly CPI came in below forecasts at -0.5% in March, showing that the post-pandemic recovery in  domestic consumption has still not picked up pace.  

At the time of writing, the aussie trades 0.12% lower at 0.7641, having hit fresh daily lows at 0.7637 in the last minutes.

The rebound in the US dollar alongside the Treasury yields seems to add to the weight on the aussie dollar. The US dollar index is attempting a bounce around 92.10 while the 10-year US rates recover to 1.63%.

The sell-off in the US yields sent the dollar under the bus after  Fed Chair Jerome Powell reiterated the dovish outlook on the monetary policy while downplaying the inflation risks.

Meanwhile, the RBA warned of excessive lending risks amid a surge in house prices in its latest Financial Stability Review (FSR), unnerving the optimists.

However, the mild gains in the S&P 500 futures and the rally in oil prices are offering support to the Aussie bulls. Next of note for the major remains the US PPI data release, as the dynamics in the dollar and yields could likely remain the main market motor.

AUD/USD: Technical levels to consider