AUD/USD stays below 0.7400 on sour sentiment, China/US Inflation eyed

• AUD/USD struggles to overcome monthly low, consolidates weekly losses of late.
• Market sentiment worsens of reflation fears, doubts over Fed reshuffle.
• US Treasury yields drop six-week low, equities weakness as well.
• Aussie Westpac Consumer Sentiment, China CPI can entertain traders ahead of US inflation figures.

AUD/USD remains depressed around weekly low, fades bounce off 0.7360 near 0.7380 as Asia-Pacific traders begin Wednesday’s work.

Although the upbeat Aussie data and softer US dollar pleased the pair buyers during early Tuesday, concerns relating to inflation, Fed and China weigh on the quote afterward. However, today’s inflation numbers from Australia’s key customer China, followed by the US Consumer Price Index (CPI) figures, will be the key to watch for fresh impulse.

National Australia Bank’s (NAB) strong sentiment numbers for November failed to extend the week-start positive performance even as the US Dollar Index (DXY) stays weak. The reason could be linked to the market’s rush for risk-safety, which in turn underpinned the US Treasuries and gold prices while weighing down the equities.

The risk aversion takes clues from uncertainty over the US Federal Reserve’s (Fed) next step amid chatters over reshuffle and policy bears being interviewed by President Joe Biden. Also, the US Producer Price Index (PPI) matched the upbeat forecast for October and kept reflation fears on the table ahead of today’s key price pressure data. Additionally challenging the sentiment were fears over China’s debt concerns and Evergrande, not to forget chatters of further heating inflation and supply outage.

Alternatively, Fed Chair Jerome Powell tried to downplay the inflation fears and strong jobs report but failed to revive market optimism.

Moving on, the Westpac Consumer Confidence for November, prior -1.5%, will precede China’s CPI and PPI data for October to direct short-term AUD/USD moves. Following that, the US inflation numbers will be crucial to watch. Above all, Fedspeak and US stimulus are the key to follow.

Given the chatters over 26-year high factory-gate inflation from China, AUD/USD may remain pressured on firmer inflation data as Beijing struggles to handle multiple issues. The downside momentum may escalate should the US CPI remain firmer.

Read: US October CPI preview: Inflation data unlikely to discourage gold bulls

Technical analysis

Failures to cross the 200-day EMA resistance, around 0.7435 by the press time, redirects AUD/USD bears towards the 0.7360 support comprising 50% Fibonacci retracement (Fibo.) of September-October upside. A clear break of the key Fibo. becomes necessary for the bears to keep reins.