AUD/USD consolidates in a range, remains below 0.6800 mark and 100-day SMA

The AUD/USD pair continues with its struggle to make it through the 100-day Simple Moving Average (SMA) and seesaws between tepid gains/minor losses, below the 0.6800 mark through the Asian session on Thursday. The pair, however, remains well within the striking distance of its highest level since February 24, around the 0.6815-0.6820 region touched the previous day.

Mixed Chinese inflation figures published early today, along with a modest US Dollar (USD) uptick, act as a headwind for the AUD/USD pair. In fact, the National Bureau of Statistics (NBS) reported that the headline CPI in China rose by 0.1% rate in April, marking a sharp deceleration from the 0.7% annual rise seen in the previous month and the lowest rate since February 2021. This indicated that domestic demand remains lacklustre. Adding to this, China’s Producer Price Index fell for the seventh straight month, by 3.6% year-on-year during the reported month, and fueled worries about economic health.

That said, the Reserve Bank of Australia's (RBA) hawkish outlook, indicating that some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time, limits the downside for the Aussie. Apart from this, growing acceptance that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycles keeps a lid on any meaningful upside for the USD and continues to lend some support to the AUD/USD pair. The market expectations were reaffirmed by the release of the crucial US CPI on Wednesday, which pointed to further signs of easing inflationary pressures.

The aforementioned fundamental backdrop seems tilted firmly in favour of bullish traders and suggests that the path of least resistance for the AUD/USD pair is to the upside. That said, the recent repeated failures to find acceptance above the 100-day SMA make it prudent to wait for strong follow-through buying before positioning for any further near-term appreciating move. Market participants now look to the US economic docket, featuring the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims data, for a fresh impetus later during the early North American session.

Technical levels to watch