AUD/USD struggles to defend 0.6900 despite upbeat Aussie Consumer Inflation Expectations

• AUD/USD struggles to cheer upbeat data, stays pressured around fresh two-year low.
• Australia Consumer Inflation Expectations rose to 5.0% for May but may not justify RBA’s 50 bps rate hike.
• Risk-on mood prevails as traders move past US inflation with softer yields, USD.
• Qualitative catalysts to help determine nearby directions ahead of second-tier US data.

AUD/USD remains pressured around the lowest levels since June 2020, refreshed earlier in Asia, even as Australia’s Consumer Inflation Expectations for May rose past forecasts. In doing so, the Aussie pair also fails to cheer softer US dollar and a pullback in Treasury yields, not to forget cautious optimism in the market.

Australia’s Consumer Inflation Expectations for May came in at 5.0% versus 4.8% expected and 5.2% prior. Although the hopes are in favor of the higher price pressure, the numbers fail to justify the Reserve Bank of Australia’s (RBA) recent 50 basis points (bps) rate hike, which in turn seemed to have weighed on the AUD/USD prices of late.

That said, the Australian dollar’s latest weakness could also be linked to the covid conditions in China. Although the recent coronavirus figures from Shanghai and mainland China ease, the community cases seem to keep the lockdowns intact.

Elsewhere, the US 10-year Treasury yields dropped 1.4 basis points (bps) to 2.92%, around a two-week low by the press time. In doing so, the benchmark bond coupons drop for the fourth consecutive day even as the US Consumer Price Index (CPI) rose to 8.3% YoY versus 8.1% expected and 8.5% prior. More importantly, the CPI ex Food & Energy, better known as Core CPI, crossed 6.0% forecasts with 6.2% annual figures, versus 6.5% previous readouts.

Given the softer yields, S&P 500 Futures rise 0.30% intraday gains, in contrast to Wall Street’s losses, amid mixed chatters from Fed speakers. During early Thursday in Asia, the previously hawkish Federal Reserve Bank of St. Louis James Bullard mentioned that he ''won't emphasize single inflation report too much but inflation is more persistent than many have thought.''

Moving on, weekly prints of the US Jobless Claims and monthly Producer Price Index (PPI) will decorate today’s calendar but major attention will be given to the qualitative catalysts for clear directions.

Technical analysis

Unless crossing a horizontal area comprising lows marked during late 2021 and early 2022, around 0.6990-7000, AUD/USD remains bearish. That said, a three-week-old descending trend channel restricts short-term moves between 0.6870 and 0.7170.