AUD/USD ignores unimpressive China inflation data around 0.7100, US CPI eyed

• AUD/USD grinds near the fortnight low, paring the biggest daily fall in a month after China's inflation data.
• China CPI eased on YoY basis but improved versus downbeat MoM forecast in May, PPI matches 6.4% expectations.
• Sour sentiment, anxiety ahead of the key statistics keep traders on their toes.
• US CPI will be important amid hawkish hopes from the next week’s Fed meeting.

AUD/USD dribbles around 0.7100, following the heaviest daily slump in four weeks, as the market’s cautious mood joins unimpressive China inflation numbers during early Friday.

China’s headline inflation number, namely the Consumer Price Index (CPI), reprints 2.1% figures to ease below the 2.2% market consensus. Further, the factory-gate inflation gauge, namely the Producer Price Index (PPI), matches the 6.4% forecasts for May. Earlier in the day, Australia’s HIA New Home Sales dropped to -5.5% MoM in May versus -1.2% prior.

Also read: Breaking: China CPI 2.1%, AUD/USD steady below 0.7100

Talking about the US data, weekly Jobless Claims rose past 210K forecasts to 229K for the week ended on June 3 while the US inflation expectations per the 10-year breakeven inflation rate of the St. Louis Federal Reserve (FRED) data clings to 2.75% in the last two days.

Escalating fears of faster/heavier rate hikes and the negative economic repercussions of the same seem to weigh on the market’s performance of late. The growing concerns over hot inflation and China’s covid conditions, not to forget the Russia-Ukraine tussles, are some of the extra catalysts that weigh on the AUD/USD prices.

That said, the US Federal Reserve will hike its key interest rate by 50 basis points in June and July, with rising chances of a similar move in September, according to a Reuters poll of economists who see no pause in rate rises until next year. In addition to the firmer belief over the Fed’s aggression, the White House's expectations of a stronger inflation figure and downbeat economic forecast from the Organisation for Economic Co-operation and Development (OECD), as well as fears of recession conveyed by the World Bank (WB), also roils the most.

Also read: US Consumer Price Index May Preview: Fed policy is set but there is room for surprise

Technical analysis

In addition to a U-turn from the monthly horizontal resistance surrounding 0.7260-65, AUD/USD bears also cheer a clear downside break of the 21-DMA, near 0.7115 by the press time. That said, the 0.7000 threshold and 0.6955-50 support zone, comprising multiple levels marked during May 09-19, could lure the pair sellers during the further downside.