AUD/USD bulls ignore challenges to sentiment, mixed China data to poke 0.6800 amid softer US Dollar

• AUD/USD takes the bids to refresh intraday high during three-day uptrend.
• China CPI eased on MoM but improved on YoY during November, PPI also rose.
• Fears of US sanction on China, Russia joins hopes of Sino-American ties, Covid optimism to favor Aussie bulls.
• Downbeat US data, pre-Fed consolidation weigh on greenback ahead of consumer-centric figures.

AUD/USD marches towards the weekly high even as China’s inflation numbers flashed mixed signals on early Friday. In doing so, the Aussie pair rises to the highest levels in four days while refreshing intraday top near 0.6800 by the press time.

China’s headline Consumer Price Index (CPI) dropped to -0.2% MoM during November versus 0.1% expected and prior. However, the yearly figures came in firmer, to 1.6% versus 1.0% market forecast and 2.1% prior. On the same line was the Producer Price Index (PPI) which improved to -1.3% YoY during the stated month despite -1.5% forecasts and -1.3% previous readings.

Not only the mixed data but the latest challenges to the sentiment should have also probed the AUD/USD bulls due to the pair’s risk-barometer status.

The latest news from the Wall Street Journal (WSJ) cited the risks of the elevated tension between the US and China, as well as with Russia. "The US is set to levy fresh sanctions against Russia and China on Friday, actions that include targeting Russia’s deployment of Iranian drones in Ukraine, alleged human-rights abuse by both nations and Beijing’s support of alleged illegal fishing in the Pacific, according to officials familiar with the matter," reported the Wall Street Journal (WSJ) on early Friday.

The same pours cold water on the face of hopes that Sino-American relations will improve. Previously Reuters stated that China wants stabilized relations with the United States in the short term as it faces domestic economic challenges and push back in Asia to its assertive diplomacy, White House Indo-Pacific coordinator Kurt Campbell said on Thursday.

On the positive side, the US Dollar Index (DXY) prints a three-day downtrend as traders brace for the next week’s busy schedule comprising the Federal Reserve (Fed) monetary policy meeting and the inflation data, not to forget today’s consumer-centric figures. In doing so, the greenback’s gauge versus the six major currencies fails to track the recovery in the US Treasury bond yields while justifying the downbeat US data.

On Thursday, US Initial Jobless Claims matched 230K market consensus for the week ended on December 02, versus the upwardly revised 226K prior. Further, the four-week average also printed 230K figure compared to 229K previous readings. Earlier in the week, the US Goods and Services Trade Balance deteriorated to $-78.2 billion versus $-79.1 billion expected and $-73.28 billion prior. Further, the final readings of the Unit Labour for Q3 eased to 2.4% QoQ versus 3.5% first estimations.

Amid these plays, S&P 500 Futures and the US Treasury bond yields remain pressured but the US Dollar fails to justify its safe-haven status ahead of the preliminary readings of the Michigan Consumer Sentiment Index for December, expected 53.3 versus 56.8 prior. Also important to watch will be the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for the said month, 3.0% previous readings. Above all, the next week’s Federal Open Market Committee (FOMC) meeting will be crucial for the Aussie pair to observe for clear directions.

Technical analysis

A clear upside break of the horizontal resistance area comprising multiple levels marked since November 15, between 0.6780 and 0.6790, becomes necessary for the AUD/USD bulls to keep the reins.

Also read: AUD/USD Price Analysis: Retreats from 0.6780-90 resistance region