AUD/USD bulls attack 0.6900 with eyes on China’s return, US inflation data

• AUD/USD buyers keep reins at a two-week high, up for the third consecutive day.
• Firmer sentiment, US dollar weakness and hopes from upcoming data favored buyers.
• RBA versus Fed divergence, absence of China seemed to have probed bulls.
• Australia’s NAB sentiment data, US CPI will be crucial ahead of Thursday’s Aussie jobs report.

AUD/USD gains the buyer’s attention as it refreshes a fortnight high around 0.6900 ahead of the all-important US inflation data. Also keeping the Aussie pair on the watch is the return of China after a long weekend, as well as Thursday’s employment data from the Pacific major.

The Aussie pair cheered broad weakness in the US dollar, as well as the risk-on mood, to portray a positive start to the key week. The underlying reasons include geopolitical and stimulus-linked expectations/news surrounding China and Russia. Also keeping the quote positive were the hopes that the global policymakers will be able to overcome the latest economic pessimism, even at higher rates.

Chatters that Ukraine is gaining success in pushing back the Russian military from some of its battlegrounds seem to have underpinned the market’s cautious optimism, even as the same raised the fears of Russia’s harsh retaliation. On the same line could be the hopes of more stimulus from major economies like China, the US, the UK and Europe. Furthermore, the latest news from the Wall Street Journal (WSJ) suggesting that the US gas prices are down for the 13^th consecutive week also eased the market’s pressure and favored the risk-on mood, as well as the gold price.

Additionally, upbeat prices of metals, especially iron ore and gold, seemed to have joined the firmer Wall Street to favor the AUD/USD bulls. It should be noted, however, that the yields were up but could not underpin the US dollar recovery and hence propelled the Aussie pair.

That said, the US Dollar Index (DXY) printed a four-day downtrend to fall to the lowest levels in a fortnight, around 108.30 at the latest.

Looking forward, the August month sentiment gauges from the National Australia Bank (NAB) could immediate direction to the AUD/USD prices. However, major attention will be given to the US Consumer Price Index (CPI) for the stated month and Thursday’s release of Australia’s employment data. The forecasts suggest the headline number ease to -0.1% MoM versus 0.0% prior while the CPI ex Food & Energy is likely to remain unchanged at 0.3% MoM.

Also read: US CPI Preview: Dollar set to climb on low core expectations, three scenarios

Technical analysis

A clear upside break of the one-month-old descending trend line, around 0.6865 by the press time, seeks validation from the 200-SMA hurdle surrounding 0.6920 to convince the AUD/USD bulls.