AUDUSD eyes an establishment above 0.6500 as risk profile soars, US/China CPI in focus

• AUDUSD is aiming to shift business above 0.6500 amid a cheerful market mood.
• US core CPI data will remain in the spotlight for further guidance on US monetary policy.
• A decline in China’s CPI will accelerate the odds of a dovish policy from the PBOC.

The AUDUSD pair has turned sideways above the psychological resistance of 0.6500 in the early Asian session. In late New York, the asset rebounded after sensing a buying interest of around 0.6480. A sheer recovery in the S&P500 futures indicated that the risk profile is still solid and the decline has been bought by the market participants.

Meanwhile, the US dollar index (DXY) has rebounded marginally after registering a fresh seven-week low at 109.36. The 10-year US Treasury yields have dropped to 4.13% amid chatters over a less-hawkish monetary policy by the Federal Reserve (Fed) in December.

But before that, investors are laser-focused on the release of the US Consumer Price Index (CPI) data, which will release on Thursday. As per the estimates, the headline inflation is seen lower at 8.0% vs. the prior release of 8.2%. Weaker gasoline prices are continuously weighing on the headline inflation rate as oil is a key component.

While the core CPI that excludes oil and food prices is seen marginally lower at 6.5% against the former release of 6.6%. The absence of promising exhaustion signs in the core CPI has remained a major factor, which drove Fed’s interest rates at sheer speed.

On the Aussie front, investors are awaiting the release of China’s CPI data. The annual inflation rate is seen lower at 2.4% vs. 2.8% reported earlier. A decline in the inflationary pressures will trigger the expectations of more stimulus packages and dovish commentaries from the People’s Bank of China (PBOC). It is worth noting that Australia is a leading trading partner of China and PBOC’s policies have a significant impact on the antipodean.