AUD/USD fails to cheer upbeat China inflation data, prints three-day downtrend towards 0.7700

• AUD/USD stays depressed around the intraday low even as China prints welcome inflation figures for December.
• China’s CPI grew 0.2% YoY, PPI recovered to -0.4% on yearly format.
• Risks dwindle mid virus woes, Sino-American tension and US stimulus hopes.
• A light calendar in Asia keeps risk catalysts on the driver’s seat.

AUD/USD ignores more than expected China inflation numbers while holding the lower ground near 0.7710, down 0.62% intraday, during Monday’s Asian session. The reason for the quote’s latest weakness could be traced from the risk-off mood as well as the US dollar’s sustained recovery moves.

China’s Consumer Price Index (CPI) and Producer Price Index (PPI) for December crossed upbeat forecasts while flashing 0.2% and -0.4% YoY figures. It should be noted that the monthly CPI 0.7% versus 0.4% expected -0.6% prior.

Read: China Consumer Price Index: +0.2% Y/Y vs +0.1% expected, AUD/USD meets support

Earlier in the day, Australia’s final reading of November’s Retail Sales rose past-7.00% forecast to 7.1% whereas a monthly inflation report from the Melbourne Institute grew beyond 1.3% YoY to 1.5%. However, challenges to risks weigh on the AUD/USD pair off-late.

Challenges to the sentiment can be spotted via worsening coronavirus (COVID-19) conditions and the Sino-American tussle, not to forget a drive to impeach US President Donald Trump.

Although Greater Brisbane is relieved from activity restrictions after a three-day lockdown while finding zero cases of the pandemic, chatters concerning the spread of the virus strain, found in the UK and South Africa, weigh on risks.

Further, the US is said to be considering more sanctions on China, per Reuters. The Trump administration recently raised bars for doing business with eight Chinese applications and pushed the New York Stock Exchange (NYSE) to rethink over the delisting of stocks from Beijing. Also, Goldman Sachs and Morgan Stanley are considering reducing holdings from Hong Kong due to the same reason.

Elsewhere, Democrats are tightening their belts to impeach Trump with US House Speaker Nancy Pelosi showing readiness to put forward a proposal in front of the policymakers.

Against this backdrop, the S&P 500 Futures decline 0.40% while the US Dollar index (DXY) jumps to the highest since December 23.

Moving on, risk catalysts will be the key and hence further AUD/USD downside is expected. However, more clarity over the US fiscal stimulus can placate sellers.

Technical analysis

In addition to the 0.7700 round-figure, a 10-week-old rising support line, around 0.7675, also restricts short-term AUD/USD downside. Meanwhile, April 2018 top surrounding 0.7815, the recent high of 0.7820 holds the gate for fresh run-up targeting March 2018 peak surrounding 0.7920.