AUD/JPY drops to intra-day low on mixed China inflation data

China CPI and PPI both matched expectations.
Traders concentrated more on soft PPI then upbeat CPI.
Risk events remain in the spotlight.

Although Chinese CPI managed to post upbeat numbers, AUD/JPY traders emphasized more on the sluggish PPI to bet on weaker factory activity as the quote drops to a fresh intra-day low around 75.40 after the China inflation numbers released on early Wednesday.

China’s May month consumer price index (CPI) matched 2.7% YoY forecast versus 2.5% previous while producer price index (PPI) also met a market consensus of 0.6% mark against +0.9% prior.

The pair was on the back foot recently as global risk appetite improved after the absence of the US tariffs on Mexico and also because of fresh trade talks between the US and China at G20.

Though, tweets threatening fresh tariffs on China and criticizing Fed from the US President offered intermediate moves.

Risk tone remains mostly unchanged as recently mixed signals concerning the trade deals with China/Mexico push global investors to wait for headline data and/or details of risk events for fresh impulse. The global risk barometer, 10-year US treasury yield clings to 2.14% by the press time.

While China inflation numbers are already out and loud, other key events like ECB President’s speech and the US CPI are on the market players’ radar. Additionally, developments surrounding the US-China trade deal might also gain major attention.

Technical Analysis

While a break of 75.40 holds the gate for a fresh downturn to 75.00, 74.50 and the year 2016 low around 72.40, an upside clearance of 76.40 becomes necessary for the pair to aim for 77.00 and 50-day simple moving average (SMA) around 77.50.

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