AUD/USD steadies above 0.7200 with eyes on China/US inflation

• AUD/USD grinds higher around weekly top as market sentiment dwindles on the key day.
• Pair buyers rethink Powell-led advances ahead of the key CPI figures.
• World Bank’s economic forecasts join virus woes to magnify pre-data anxiety, mixed data adds to trading filters.
• December inflation data from China, US will be important amid talks of monetary policy actions.

AUD/USD seesaws around 0.7210-15 during a quiet Asian session on Wednesday as traders await the key inflation figures from China and the US. Adding to the trading filters are recently negative headlines concerning the coronavirus from the US and Australia.

It’s worth noting that Fed Chair Jerome Powell’s hawkish testimony before the Senate Banking Committee couldn’t defend US dollar bulls the previous day as market players smelled uncertainty over balance sheet normalization and hopes of overcoming the Omicron wave.

The Fed Boss showed readiness to hike interest rates to stop inflation from being entrenched but also expected that the supply crunch will ease somewhat and the economic impact of the Omicron variant will be short-lived.

On the other hand, WB’s latest economic forecasts cited coronavirus woes to cut the global GDP expectations for 2022 to 4.1% from 4.3% previous estimations. The World Bank also trimmed economic forecasts for the US and China, by 0.5% to 3.7% and by 0.3% to 5.1% in that order.

Recently, Washington Mayor Muriel Bowser declared a limited public health emergency until January 26 to ease the strain on health services. At home, Australia reports a shortage of antigen test kits as the Pacific major reports the second day of increase in total cases so far on Wednesday, around 76,470 at the latest.

It’s worth noting that Merck’s update, suggesting its covid treatment pill’s ability to tame coronavirus and all variants, placates the virus fears but the pre-data anxiety probes AUD/USD bulls.

Talking about data, Australia's Job Vacancies for three months to November jumped past -9.8% prior to 18.5% QoQ and favored the pair's upside. On the other hand, US NFIB Business Optimism Index rose past 98.4 to 98.9 for December while IBD/TIPP Economic Optimism for January eased to 44.7 versus 48.4 previous readouts.

Amid these plays, S&P 500 Futures and the US Treasury yields remain sluggish after Wall Street cheered the second consecutive daily fall in the US 10-year Treasury yields.

Moving on, China Consumer Price Index (CPI) for December, as well as the Producer Price Index (PPI), will direct immediate upside moves of the AUD/USD ahead of the US inflation figures. Forecasts suggest China’s headline CPI ease from 2.3% to 1.8% YoY while the PPI may witness ease from 12.9% to 11.1% for the said month, which in turn may add to the upside filters for the pair buyers. However, the softer China inflation may push the People’s Bank of China (PBOC) towards more easing and can restrict the quote’s south-run. However, the hawkish expectations from US CPI, likely rising to 7.0% YoY versus 6.8% prior, could reverse the latest gains.

Read: US Consumer Price Index December Preview: The Fed’s die is cast

Technical analysis

AUD/USD seesaws around 100-SMA level of 0.7210 while poking the previous support line from December 03, near 0.7220.

Given the higher lows of prices and RSI joining the sustained bounce off 200-SMA level surrounding 0.7165, the Aussie pair is likely to overcome the immediate resistance near 0.7220, which in turn will propel the quote towards 0.7275-80 region, comprising tops marked in a fortnight.