AUD/USD eases below 0.7200 as inflation, growth fears favor USD, China trade data eyed

• AUD/USD remains pressured, eyes the first weekly loss in four.
• US dollar benefits from concerns that higher inflation, faster monetary policy normalization to take a toll on economic growth.
• RBA’s rate hike, China’s post-covid unlock fail to impress bulls amid chatters over Fed’s moves, US CPI.
• China trade numbers for May to offer immediate directions ahead of ECB, US CPI.

AUD/USD holds lower ground near 0.7190, keeping the previous day’s losses in a tight range, as sour sentiment joins anxiety ahead of China’s trade numbers. Also exerting downside pressure on the Aussie pair are the recent losses on Wall Street and gold’s failures to impress bulls, not to forget broad US dollar strength.

That said, the Wall Street benchmarks snapped a two-day rebound and the US Dollar Index (DXY) regained upside momentum as it closed with 0.21% daily gains around 102.55 on Wednesday, after retreating from 102.77. Further portraying the risk-off mood is the 5.3 basis points (bps) of an addition to the US 10-year Treasury yields, to 3.027%.

The risk-aversion wave got appreciation after White House spokeswoman Karine Jean-Pierre said they expect the inflation numbers to be released at the end of the week to be elevated. Also supporting the forecasts are the recently firmer US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data. That said, the inflation precursor stays firmer around the one-month high of late.

On the same line, the Organisation for Economic Co-operation and Development (OECD) cuts the global growth outlook for 2022 while World Bank (WB) President David Malpass warned that faster-than-expected tightening could recall a debt crisis similar to the one seen in the 1980s.

It should be noted that the Reserve Bank of Australia’s (RBA) surprise 50 bps rate hike and China’s gradual economic transition after the covid-led lockdowns appear to fall short of convincing the AUD/USD pair buyers ahead of this week’s key data/events.

Among them, today’s China Trade Balance, Imports and Exports for May will be the first to direct the Aussie pair ahead of Friday’s inflation numbers from China and the US. Also important will be today’s monetary policy decision from the European Central Bank (ECB), due to its direct impact on the US dollar and the market sentiment.

Although likely improvement in China’s trade numbers may probe the AUD/USD bears, sour sentiment may keep exerting downside pressure on the risk barometer pair.

Technical analysis

AUD/USD fades bounce off yearly low marked in May amid a failure to cross the 200-DMA, around 0.7255 by the press time. The anticipated pullback moves, however, will need validation from the 21-DMA level surrounding 0.7100.