AUD/USD advances towards 0.6900 despite renewed US Inflation recovery concerns

• AUD/USD is marching towards 0.6900 as investors have ignored signs of recovery in the US Inflation.
• The US has warned China if it decides to provide lethal military aid to Russia for its invasion of Ukraine.
• Weaker Australian employment data might trim overall consumer spending ahead.

The AUD/USD pair is struggling to extend its upside move above the immediate resistance of 0.6880 in the early Tokyo session. The upside bias for the Aussie asset is still favored as the risk profile is still solid. The major is expected to continue its upside to near the round-level resistance of 0.6900 despite renewed concerns of a rebound in the United States inflation.

S&P500 futures witnessed some losses on Friday and ended the week with mild losses as fresh concerns about a rebound in the US Consumer Price Index (CPI) raised red flags for economic recovery. The odds are favoring the continuation of policy tightening by the Federal Reserve (Fed) as the battle against stubborn inflation is getting complicated. The trading activity is expected to remain light as the US markets are closed on Monday because of President’s Day.

The US ambassador to the United Nations, Ambassador Linda Thomas-Greenfield, said Sunday that China would cross a “red line” if the country decided to provide lethal military aid to Russia for its invasion of Ukraine. This might impact the market sentiment ahead and risk-perceived currencies could face the heat.

Meanwhile, the US Dollar Index (DXY) is looking for a cushion around 103.50 after a perpendicular downside move. The USD Index could show some recovery as higher-than-anticipated US CPI, Producer Price Index (PPI), and Retail Sales data have cleared that consumer spending is getting traction again, bolstering the chance of more rate hikes by Fed chair Jerome Powell ahead.

On the Australian front, weaker employment data will delight the Reserve Bank of Australia (RBA) as consumer spending could drop ahead. The economy has reported an overall lay-off in the labor market by 11.5K vs. the consensus of 20K addition of employees. While the Unemployment Rate is seen higher at 3.7% vs. the prior release and the expectations of 3.5%.