AUD/USD: Bears keep reins below 0.7400 despite firmer China inflation

• AUD/USD remains on the back foot for second consecutive day after China CPI, PPI.
• China CPI, PPI both crossed market forecasts and prior readings in October.
• Risk-off mood, firmer Treasury yields exert additional downside pressure.
• US inflation, stimulus headlines and risks from China property market in focus.

AUD/USD refrains from cheering strong inflation numbers from China during early Wednesday, down 0.18% intraday near the daily low of 0.7366.

China’s headline Consumer Price Index (CPI) rose past 1.4% market consensus and 0.7% previous readings to 1.5% YoY. On the same line, the Producer Price Index (PPI) refreshed a multi-month high with the 13.5% yearly figure compared to 12.4% expected and 10.7% prior.

Read: Higher Oct Chinese CPI fails to move the needle on AUD/USD 

Although upbeat inflation data from the key customer helped AUD/USD bears to take a breather, sour sentiment weighs on the quote due to its risk barometer status.

The market’s mood worsens of late inflation concerns mount, pushing the US Federal Reserve (Fed) towards a faster run to the rate hike cycle, as recently cheered by the St. Louis Federal Reserve President James Bullard. The Fed member appeared during the CNBC interview while expecting the US central bank to hike its benchmark rate twice in 2022, after it’s finished with winding down its bond-buying program.

Further, US Treasury Secretary Janet Yellen crossed wires via NPR Marketplace interview and warned of a recession if the debt limit is not raised. The policymaker also said, “The Federal Reserve will not allow 1970s-style inflation to return.”

Elsewhere, a 50% slump in share prices of China’s real estate player Fantasia Group after a month-long trading halt also back the recent concerns over property players’ troubles in Beijing.

Alternatively, White House Economic Advisor Brian Deese expects a vote in the House next week on the larger social infrastructure package, per tweets from Fox Business reporter Edward Lawrence. “He says some House members will receive more information about how the bill will not add to the debt by the end of this week,” adds Fox’s Lawrence.

Amid these plays, the US 10-year Treasury yields rise 1.2 basis points (bps) to 1.46% while the S&P 500 Futures drop 0.20% intraday by the press time.

Having witnessed the initial market reaction to China's inflation numbers, the AUD/USD traders will wait for the US CPI and PPI data for fresh impulse. Also important will be the updates on the US stimulus and China real-estate major Evergrande as a coupon payment is due for the struggling firm on Wednesday.

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

Technical analysis

AUD/USD justifies the downside break of the 200-SMA and descending RSI line on the four-hour (4H) chart, not to forget mentioning that recently bearish MACD signals. Though, the double bottoms marked around 0.7360 restricts the quote’s immediate downside before directing it to the 61.8% Fibonacci retracement (Fibo.) of the September-October uptrend, near 0.7315. Meanwhile, a clear upside break of the 200-SMA hurdle around 0.7385 needs validation from the 0.7400 round figure to aim for a convergence of the 100-SMA and 23.6% Fibo. close to 0.7470.