AUD/USD slips below 0.7700 despite upbeat China CPI, looks to US stimulus for fresh impulse

• AUD/USD refreshes intraday low even as China flashed better-than-forecast inflation data.
• China’s CPI, PPI rose beyond +1.5% and -0.4% YoY forecasts in February.
• Risks remain sluggish while waiting for the US covid relief bull announcements.
• US CPI also becomes the key to watch.

AUD/USD breaks the 0.7700 threshold in the latest 12-pip fall after China’s inflation data during early Wednesday. In doing so, the quote ignores welcome price prints from the biggest customer as market sentiment sours ahead of the key US coronavirus (COVID-19) relief bill.

China’s headline Consumer Price Index (CPI) grew above 0.4% to 0.6% MoM while rising 1.7% YoY versus 1.5% expected. Further, the Producer Price Index (PPI) followed the suit by recovering more than -0.4% forecast to -0.2%.

Read:  China Consumer Price Index beats expectations, market awaits US CPI

Earlier in the day, Reserve Bank of Australia (RBA) Governor Philip Lowe struck downbeat comments while raising doubts on the future rate hikes and bond purchases. Even so, the policymaker said, “the economy was now within a striking distance of its pre-pandemic output.”

It should also be noted that Australia’s Westpac Consumer Confidence grew past-1.8% forecast and 1.9% prior readings to flash 2.6% but failed to entertain AUD/USD traders waiting for the key US covid stimulus.

Market sentiment turns sluggish after the previous day’s optimism surrounding America’s $1.9 trillion relief bill. The same seems to have favored the US dollar to consolidate recent losses while also restricting the US 10-year Treasury yields around 1.53%. Stocks in Asia-Pacific and S&P 500 Futures stay inactive, except for New Zealand’s NZX 50 that rallied over 1.0% on domestic catalysts.

Although the passage of the US aid package becomes the key and should boost market sentiment, indirectly helping the AUD/USD, any disappointment will not be taken lightly and hence cautious mood can weigh on the quote ahead of the results. Other than the key event, the US Consumer Price Index (CPI) for February, expected 1.7% YoY versus 1.4% prior, will also be important to watch.

Technical analysis

Considering the bounce off an ascending support line from December 21, currently around 0.7645, as well as an upside break of a two-week-old falling trend line, at 0.7675 now, AUD/USD is likely rising towards a 50-day SMA level near 0.7740.