AUD/USD: Bears stay directed to 0.7400 on downbeat China inflation, covid woes

• AUD/USD whipsaws near multi-day low on soft prints of China CPI, PPI before refreshing the yearly low.
• China CPI eased to 1.1% YoY, PPI matched 8.8% forecast for June.
• Covid concerns underpin DXY rebound, weigh on stock futures.
• Qualitative catalysts remain as the key, virus updates are important for near-term direction.

China’s headlines inflation figures offered another reason for AUD/USD bears to aim for the 0.7400 during early Friday. Although the quote moved less on the data, it does lose 0.23% while declining 0.7410 by the press time. In doing so, the Aussie pair refreshes the yearly low.

China’s headline Consumer Price Index (CPI) drops below 1.3% YoY forecast to 1.1% but the Producer Price Index (PPI) proved right the downbeat expectations of 8.8% versus 9.1% previous readouts.

Read: Chinese CPI & PPI arrive lower, AUD keeps steady

Other than the downbeat inflation figures from the key customer, which has been a frenzy of late, the coronavirus (COVID-19) variant woes are the additional, also the key, burden over the AUD/USD prices.

Aussie Prime Minister Scott Morrison changed his stance over the AstraZeneca vaccine, also pushed people to take early jabs at Pfizer. However, Australia’s covid infections jumped to three days high on July 08 and the same pushes authorities to rule out unlock any time soon. Recently, New South Wales (NSW) Premier said, the Aussie state to tighten lockdown, hard to see opening by next Friday. Gladys Berejiklian also said, “NSW is facing the biggest challenge we have faced since the pandemic started.”

On the other hand, UK refreshed the six-month high of the virus cases, unfortunately, whereas the numbers as grim for Indonesia, South Korea and Thailand.

The grim reality of the variant’s resistance to the vaccines and ability to spread faster add to the market’s fears of such developments and put a safe-haven bid under the US dollar.

It’s worth noting that China Commerce Minister crossed wires early in Asia, via Reuters, expecting “retail sales in the 14th five-year plan period, from 2021 to 2025, to grow by an average of 5% per year, and trade in goods to grow by 2% per year.”

Amid these plays, S&P 500 Futures drop 0.2% while the 10-year Treasury yield regains 1.31%, up 2.6 basis points (bps) by the press time.

Having witnessed the initial reaction to China data, AUD/USD traders will keep their eyes on the covid updates, amid a light calendar elsewhere, for fresh impulse.

Technical analysis

AUD/USD seesaws near the September 2020 top amid oversold RSI conditions, which in turn could restrict the pair’s further downside towards 0.7345-40 horizontal support comprising levels marked since late September. It should, however, be noted that the corrective bounce may gain fewer accolades until crossing the 200-DMA level around 0.7580.