AUD/USD: Edges lower towards 0.7800 on China’s mixed inflation data, Aussie budget eyed

  • AUD/USD seesaws around intraday low after China’s headlines inflation for April.
  • China CPI recovered but stayed below forecasts, PPI remains strong.
  • Risk appetite worsens amid uncertainty over future monetary policy.
  • Aussie Treasurer Frydenberg will back record budget deficit.

AUD/USD wobbles around 0.7830, showing no major reaction to China’s inflation figures during early Tuesday. In doing so, the Aussie pair battles the risk-off mood as well as cautious sentiment ahead of the Australian budget release.

China’s Consumer Price Index (CPI) eased below -0.2% forecast to -0.3% MoM but stayed above -0.5% prior. The yearly CPI also followed the suit with +0.9% numbers versus +1.0% market consensus and +0.4% previous readouts. It should be noted that the Producer Price Index (PPI) crosses 4.4% prior and 6.6% market expectations with 6.8% numbers.

Read: China CPI 0.9% YoY vs expected 1.0% / PPI 6.8% YoY vs the expected 6.5%

Market sentiment weighs on the AUD/USD prices as mood sours on traders’ worry about the global central bank policymakers’ next moves as heavy stimulus propel reflation risk. Although the latest US jobs report backed the Federal Reserve (Fed) officials to reiterate their support for easy money, traders await move clues, especially from this week’s US CPI figures, up for publishing on Wednesday.

It should be noted that the US Republicans have recently eased their rejection of President Joe Biden’s heavy relief packages and Australia is also up ignoring the record deficit to help the Aussie people overcome the pandemic. Recently, Reuters said, “Australia’s conservative government will ditch decades of deficit warnings to embrace billions in new spending in its annual budget on Tuesday, saying a record shortfall is necessary to “secure” the economic recovery from the COVID-19 pandemic.”

The budget announcement will be out by 09:30 GMT in the Australian Parliament. Ahead of the release, Reuters said, “Analysts expect the budget deficit for the year to end June 2021 to come in around A$150 billion ($117.5 billion), still a record but down sharply from an October forecast of A$213.7 billion. The 2021/22 shortfall may shrink further to around A$80 billion.”

Although the Aussie budget may offer intermediate pullback to the AUD/USD prices, risk-related headlines will be important to watch for fresh impetus.

Technical analysis

AUD/USD risks dropping back below 0.7820 key hurdle, now support, comprising multiple levels since early January. However, the 0.7715-10 support confluence, including an ascending trend line from April 01, 100-day and 50-day SMAs, will be the key for sellers’ entry.


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