AUD/USD defends 0.7400 at fresh seven-month low, China inflation eyed

AUD/USD bears take a breather following a three-day south-run to refresh 2021 low with 0.7415, seesaws around 0.7430 amid early Friday morning in Asia. The coronavirus (COVID-19) woes pushed traders to unwind the risks and comments from RBA Governor Philip Lowe also couldn’t impress buyers, which in turn offered a double whammy of seller’s attack on the risk-barometer pair.

Covid woes jump back to the table…

Australia’s New South Wales (NSW) announced the highest infections of 2021 while the UK cases also topped a six-month high and raised doubts over July 19 unlock plans. Further, Indonesia and Thailand do struggle with the heavy death toll whereas Tokyo is up for extending the virus-led emergency to late August.

While confirming that the covid resurgence poses a downside risk to the US economic recovery, Atlanta Federal Reserve President Raphael Bostic said, per Reuters, “A new rise in coronavirus infections driven by the more virulent Delta variant could cause consumers to ‘pull back’ and slow the US recovery.

On the other hand, RBA’s Lowe tried to confirm that the recent adjustments in the bond purchases aren’t a sign of rate hikes but couldn’t gain any major response as Aussie PM Scott Morrison was speaking near the same time to placate covid fears.

It’s worth observing that the downbeat sentiment paid a little heed to the uptick in the US Jobless Claims and the ECB’s readiness to stay flexible on inflation around 2.0%, which should ideally have weighed on the US dollar but not due to its safe-haven appeal.

Amid these plays, Wall Street posted mild losses and the US 10-year Treasury yields dropped to the fresh low since February.

Looking forward, the risk-off mood may keep AUD/USD sellers hopeful but China’s Consumer Price Index (CPI) and Producer Price Index (CPI) for June may trigger the corrective pullback should the inflation gauges defy recently downward trajectory. Forecasts suggest the CPI remain unchanged at 1.3% YoY whereas PPI could ease to 8.8% from 9.0% previous readouts.

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.