AUD/USD turns sideways around 0.6750 as focus shifts to China's Inflation data

• AUD/USD is juggling around 0.6750 as investors await China’s CPI data.
• A higher-than-expected China’s inflation will weaken the aussie bulls.
• The DXY failed to sustain above 110.00 despite the hawkish speech from Fed Powell.

The AUD/USD pair is oscillating around 0.6750 as investors are awaiting the release of China’s inflation data. The pair is displaying a volatility contraction phase after continuous efforts of overstepping the immediate hurdle of 0.6760. On Thursday, the asset spent the trading session in a 0.6713-0.6770 range despite the release of various catalysts.

The speech from Reserve Bank of Australia (RBA) Governor Philip Lowe has provided a further roadmap for the aussie bulls. RBA Lowe advocated scaling down the pace of hiking interest rates to support the retail demand. As the RBA has set the peak for the Official Cash Rate (OCR), which is 3.85%, the deviation of 150 basis points (bps) from the current OCR will be covered easily. Also, the central bank is expected that the inflation rate will top around 7%.

Apart from that, weaker trade data also kept the antipodean in a tight range. The commodity-linked currency has reported a decline in monthly export data by 9.9% against an expansion of 5.1%. Also, imports have accelerated by 5.2% vs. 0.7% in the prior release. The Trade Balance has trimmed dramatically to 8,733M against the expectation of 14,500M.

In today’s session, investors will focus on the release of China’s Consumer Price Index (CPI) data, which is seen higher at 2.8% vs. 2.7% recorded earlier. An increment in China’s CPI may hurt the aussie bulls as a higher price rise index will force the People’s Bank of China (PBOC) to sound less dovish than expected. It is worth noting that Australia is a leading trading partner of China and higher inflation in China could scale down Australian exports.

Meanwhile, the US dollar index (DXY) failed to sustain above the psychological resistance of 110.00 despite the hawkish speech from Federal Reserve (Fed) chair Jerome Powell. The Fed will continue its path of hiking interest rates as bringing price stability is its foremost priority. Going forward, the focus will shift to the US CPI, which will release on Tuesday.