AUD/USD retreats towards 0.6500 on softer Australia Consumer Inflation Expectations, China woes, US CPI eyed

• AUD/USD eases from intraday high during a lackluster day after two-day losing streak.
• Australia Inflation Expectations for August eased to 4.9% from 5.2% prior.
• US President Biden signs executive order to ban certain China technology investment, Beijing appears ‘gravely’ concerned.
• US CPI will be closely examined for clear directions, risk catalysts may entertain Aussie traders ahead of the release.

AUD/USD steps back from intraday high while keeping the early-day sluggish momentum around 0.6530 after Australia inflation clues print a softer outcome for August. In doing so, the Aussie pair also fails to react to the likely US-China tension on the White House order restricting technology investments to Beijing. The reason could be linked to the market’s cautious mood ahead of the US inflation data, per the Consumer Price Index (CPI), for July.

That said, Australia Consumer Inflation Expectations eased to 4.9% from 5.2% prior, which in turn backs the Reserve Bank of Australia’s (RBA) recent pause to the tightening cycle. However, the S&P Global appears a bit hawkish on the RBA and puts a floor under the Aussie pair price. “The key risk is that inflation in Australia is more sticky than expected and the RBA has to hike interest rates more strongly,” said the global rating and research house on Wednesday.

Elsewhere, China's Commerce Ministry showed grave concerns and marked the rights to take measures in retaliation early Thursday in Asia, per Reuters. The news also quotes China Commerce Ministry as saying, “Hopes that the US will respect laws of market economy and the principle of fair competition.”

Late Wednesday, US President Joe Biden signed the much-awaited bill that allows the US Treasury Department to prohibit or restrict certain US investments in Chinese entities, per Reuters.

It should be noted that the looming economic fears from China, Europe and the UK join the global rating agencies’ crackdown on banks to weigh on the sentiment and the AUD/USD price. On the same line are fears of deflation in China and the market’s doubts about future moves of the major central banks.

Amid these plays, Wall Street closed in the red and the US Treasury bond yields were down while the S&P500 Futures printed mild gains by the press time.

Also read: US CPI Preview: Forecasts from 10 major banks, monthly pace should hold at 0.2%

Technical analysis

Although a nine-month-old rising support line, around 0.6480 by the press time, challenges the AUD/USD bears amid the nearly oversold RSI conditions, a clear downside break of the rising support line from October 2022, now immediate support near 0.6545, favors the pair sellers.