AUD/USD sets to break 0.6800 as risk-on profile firms, US PPI hogs limelight

• AUD/USD is aiming to surpass 0.6800 as the market sentiment has become extremely bullish.
• China’s factory-gate price deflation has cemented a dovish commentary from the PBOC.
• A decline in the US PPI data is going to delight the Fed as expectations for a drop in inflation will get strengthened.

The AUD/USD pair is gathering momentum to surpass the immediate resistance of 0.6800 in the Tokyo session. The Aussie asset has gained strength as investors have underpinned the risk appetite theme. The major is holding its morning gains amid an intense sell-off in the US Dollar Index (DXY). The USD Index is hovering around 104.50 and is expected to re-test weekly lows around 104.10.

Meanwhile, S&P500 futures have recovered morning losses and have resumed their upside journey. The 500-united States stock basket futures are looking to extend their gains as a slowdown in the interest rate hike pace looks imminent. While the 10-year US Treasury yields have dropped to near 3.46%.

The Australian Dollar has picked strength as China’s factory-gate price index has shown a deflation. China Producer Price Index (PPI) displayed a contraction of 1.3%. Also, the annual inflation rate has dropped to 1.6% but remained higher than anticipation. A significant decline in inflationary pressures is going to create troubles for the Chinese administration. No doubt, a dovish commentary from the People’s Bank of China (PBOC) in the upcoming monetary policy meeting has been cemented.

It is worth noting that Australia is a leading trading partner of China and fresh economic stimulus in the Chinese economy will also support the Australian Dollar.

Meanwhile, investors in the United States are focusing on Producer Price Index (PPI) data. As per the projections, the headline PPI is expected to drop to 7.4% from the prior release of 8.0%. Also, the core PPI is seen lower at 6.0% vs. the former figure of 6.7% on an annual basis. A decline in US factory-gate price index is going to delight the Federal Reserve (Fed), which is working on foot to achieve price stability as early as possible.