AUD/USD stays mildly offered near 0.6950 amid downbeat China inflation, US CPI eyed

AUD/USD holds lower ground near 0.6960 during Wednesday’s Asian session, justifying the downbeat inflation data from China. In addition to China CPI and PPI data, cautious mood ahead of the US inflation numbers and fears of economic recession also weigh on the Aussie pair.

China’s headline Consumer Price Index (CPI) eases to 2.7% YoY in July versus 2.9% expected and 2.5% prior. Further, the Producer Price Index (PPI) dropped to 4.2% compared to 8.0% market forecasts and 6.1% previous readings.

Wall Street’s downbeat performance, as well as a rebound in the US 10-year Treasury yields to 2.79%, portrays the sour sentiment. Further, S&P 500 Futures also print mild losses at around 4,120 by the press time and teases the AUD/USD bears, due to the pair’s risk barometer status.

It’s worth noting that chatters surrounding an economic slowdown recently weighed on the risk profile, especially after Russia halted oil supplies. “Russia reportedly suspended oil flows via the southern leg of the Druzhba pipeline, amid transit payment issues,” said Reuters.

Elsewhere, Fed's St. Louis president James Bullard said on Tuesday that he wants rates at 4% by the end of the year. This joins nearly recently firmer interest rate futures suggesting nearly 70% odds favoring the 75 basis points (bps) of a Fed rate hike in September.

Moving on, AUD/USD traders may witness a sluggish session ahead of the US CPI, expected to ease to 8.7% from 9.1% on YoY. However, risk catalysts may entertain the pair traders. Also important to watch will be the CPI ex Food & Energy which is likely to rise from 5.9% to 6.1%.

Technical analysis

Impending bear cross of the MACD and steady RSI to direct AUD/USD sellers towards the 50-DMA retest, around 0.6850 at the latest.