AUD/USD refreshes monthly low around 0.7300 on softer China data, firmer USD

• AUD/USD takes offers to refresh multi-day low, extending the heaviest daily fall in a week.
• China Industrial Production eased to 5.3%, Retail Sales weakened to 2.5% YoY in August.
• Risk appetite dwindles amid confusion over Fed tapering despite softer US inflation.
• Aussie Westpac Consumer Confidence recovered for September, second-tier US data, risk catalysts eyed for fresh impulse.

AUD/USD bears remain in controls, down 0.22% while taking offers around 0.7300, after the key data from the biggest customer China adds to the traders’ pessimism during early Wednesday. Also challenging the pair buyers are the recently higher covid numbers in Australia and the recovery moves of the US Treasury yields.

China Industrial Production growth slowed down to 5.3% YoY versus 5.8% forecast and 6.4% prior. The Retail Sales data also followed the tunes and dropped to 2.5% from 8.5% previous readings, compared to 7.0% market consensus.

Read: China Retail Sales misses the mark by a mile, 2.5% vs 7% expected

Earlier in the day, Australia Westpac Consumer Confidence for September rose beyond -4.4% to +2.0%. Also, China’s House Price Index for August eased to 4.2% from 4.6%.

In addition to the mixed data, US Treasury yields’ rebound, amid the doubts over the US Federal Reserve’s (Fed) next move also weigh on the AUD/USD prices due to its risk barometer status. That said, the US 10-year Treasury yields dropped the most in a month on Tuesday, before recently recovering to 1.29%.

Markets turned risk-off during Tuesday even after the US inflation figures came in softer for August. The US CPI dropped the most since January on monthly basis to 0.3% versus 0.4% expected and 0.5% prior. The CPI ex Food & Energy also dropped below 0.3% expected and previous readings to 0.1% during August, marking the biggest fall in six months. Fed’s readiness to accept a bit higher inflation figures, terming it ‘transitory’, seems to be at the test with almost double YoY figures than the US central bank’s previous target range of near 2.0%.

In addition to the re-think over the Fed tapering, covid woes and geopolitical tensions also weigh on the market sentiment, underpinning the safe-haven demand of the US Treasury bonds, which in turn weigh on its yields.

Total coronavirus infections in Australia rose by 1,685 on Tuesday versus 1,606 the previous day. The ABC News also quotes the chatters surrounding the COVID-19 travel permits in Victoria to weigh on the Aussie pair. Furthermore, the hurricanes in the US and political tension in Canada and the Middle East, not to forget the latest Sino-American rift over Taiwan, favor the AUD/USD sellers by weighing on the risk appetite and underpinning the US dollar.

Above all, the Reserve Bank of Australia’s (RBA) fears of covid and its economic impacts, portrayed by Governor Philip Lowe the previous day, also drag the AUD/USD prices.

AUD/USD will keep their eyes on the more clues to confirm the next week’s tapering from the Fed for fresh impulse ahead of tomorrow’s Aussie jobs report. The same highlights Thursday’s Retail Sales and Friday’s Michigan Consumer Confidence. For today, risk catalysts and the US Industrial Production for August, expected to ease from 0.9% to 0.5%, could offer intermediate moves.

Technical analysis

A clear downside break of 50-DMA surrounding 0.7355 keeps AUD/USD sellers directed the 0.7300 round figure before challenging the key support of surrounding 0.7225 that comprises 23.6% Fibonacci retracement of the pair’s south-run from June 25 to August 20.