AUD/USD bears approach 0.7700 amid cautious markets, US inflation eyed

• AUD/USD holds lower ground after a two-day fall.
• US 10-year Treasury yields dropped to the lowest since March amid anxiety.
• Data from Australia, China falls short of entertaining traders, so do RBA’s Kent and Aussie Treasurer Frydenberg.
• Australia Consumer Inflation Expectations may offer intermediate moves but all eyes are on the US CPI.

AUD/USD kick-starts Super Thursday by keeping the previous declines, directed towards 0.7700, around 0.7730 amid the initial Asian session. This in turn reversed the early-week gains, printing mild weekly losses by the press time. Despite a lack of activity, nervous sentiment ahead of the crucial US inflation data release kept the risk-barometer pair pressured the previous day and could pressure the moves ahead of the catalyst. However, Australia’s Consumer Inflation Expectations for June can entertain markets.

Crunch time…

AUD/USD traders paid a little heed to the domestic factors while taking clues from the broad macro, mainly the risk-sensitivity ahead of the important US economics, on Wednesday. IN doing so, the quote ignored upbeat comments from Aussie Treasurer Josh Frydenbegn and RBA Assistant Governor Christopher Kent, not to forget weaker-than-expected Westpac Consumer Confidence, -5.2% versus -4.8%, for Australia.

China’s strongest Producer Price Index (PPI) since 2008, in contrast to the downbeat Consumer Price Index (CPI), for May, were also among the catalysts that got a dull welcome.

Other than the pre-data caution, escalating tension between the US and China also contributes to the sluggish sentiment. The US passage of a bill, through the Senate, aiming to compete with Chinese tech, followed by Beijing’s expected response, preceded the draft communiqué for the G7 suggesting new examination of origins of the covid. This could be traced to US Secretary of State Antony Blinken’s previous vow, per Axios, to hold China accountable for covid origin.

Elsewhere, vaccine optimism increases and so do chatters surrounding US stimulus but nothing could gain major attention than the wait-and-watch mood ahead of the US CPI ex Food & Energy (Core CPI) for May, expected 3.4% versus 3.0% prior YoY.

Amid these plays, US 10-year Treasury yields declined four basis points (bps) to 1.49%, the lowest since March whereas the Wall Street benchmarks portrayed another sluggish day.

Although global markets and the AUD/USD prices are likely to remain subdued ahead of the key data, the expected strength of Aussie Consumer Inflation Expectations for June, forecast 3.6% versus 3.5% previous readouts, may trigger the quote’s consolidation.

Read: US CPI May Preview: Inflation angst is coming

Technical analysis

A gradually firming bearish bias below 21-day SMA and a three-week-old falling trend line, respectively around 0.7745 and 0.7770, backs 0.7675 re-test.