AUD/USD stays pressured towards 0.7700 ahead of RBA’s Kent, China CPI

• AUD/USD stays depressed after eroding the weekly gains.
• Hopes Fed’s inaction battle inflation jitters, US-China tussles, US stimulus hopes add to cautious optimism.
• US Treasury yields refresh monthly low, Wall Street trades mixed amid indecision ahead of the key Thursday.
• RBA’s Assistant Governor Kent’s speech, China CPI to decorate the calendar, risk headlines are crucial.

AUD/USD holds lower ground, after reversing the week-start gains, during the early Wednesday morning in Asia. Following an initial struggle for a clear direction, amid mixed data at home, the Aussie pair dropped on the US dollar rebound, backed by strong Treasury bonds before the crucial US inflation data and the ECB. For now, RBA Assistant Governor (Financial Markets) Christopher Kent and China’s May month Consumer Price Index (CPI) gain the market’s attention.

Indecision helps King Dollar…

Confusion over the US Fed’s next move, resulting from the mismatch of inflation expectations and strong US data, backed the rush to risk-safety, weighing on the AUD/USD due to its risk-barometer status. The cautious mood ahead of tomorrow’s key US CPI and ECB also backed the US dollar recovery the previous day.

On the contrary, chatters over US President Joe Biden’s infrastructure spending plan and escalating US-China tension, recently over the covid origin and Beijing’s readiness to battle American sanctions, add to the US Treasury bond’s upside, favoring USD in turn.

It’s worth mentioning that a mixed play of the National Australia Bank’s (NAB) sentiment figures jostled upbeat US trade numbers and second-tier employment data to widen the lack of clarity and exert additional burden on the AUD/USD prices.

The anxious traders sought solace in the US Treasury bonds, dragging the 10-year yield down nearly four basis points (bps) to 1.54%, while equities had another subdued day. Further, commodities were also mixed as gold flirted with $1,900 but WTI benefited from the demand-supply matrix.

Moving on, AUD/USD traders await RBA’s Kent as the latest catalyst from the Aussie central bank fade previously strong optimism. Following that, China’s CPI and Producer Price Index (PPI) data for May will be the key amid recently sluggish data from Australia’s largest customer. Forecasts suggest CPI jump from 0.9% to 1.6% whereas the PPI could also rise past 6.8% previous readouts to 8.5%. It should, however, be noted that the anxious markets could keep taking a toll on the AUD/USD prices.

Technical analysis

AUD/USD marks another failure to cross the 21-day SMA, backed by sluggish MACD and downbeat Momentum line, suggesting a 50-day SMA re-test, around 0.7725. Though, multiple levels marked since early April highlight 0.7675 as strong support. Meanwhile, an upside clearance of 21-day SMA level near 0.7750 may recall the 0.7800 to the chart but 0.7820 could restrict any further upside.