AUD/USD bears eye 0.6540 support on downbeat China inflation, US President Biden’s tax proposal

• AUD/USD takes offers to refresh intraday low on softer inflation from Australia’s key customer.
• China CPI slides to 1.0% YoY, PPI declines to -1.4% YoY in February.
• Hawkish Fed bets, US President Biden’s budget proposal also exert downside pressure on the risk-barometer pair.
• Second-tier US data, risk catalysts can offer immediate directions ahead of the all-important NFP.

AUD/USD reverses the previous day’s corrective bounce off a four-month low, taking offers to refresh the intraday bottom near 0.6580, as inflation numbers from Australia’s key customer China came in softer for February. Adding strength to the downside bias could be the risk-off mood and hawkish Federal Reserve (Fed) bets versus the dovish tone of the Reserve Bank of Australia (RBA) Governor.

China’s headline Consumer Price Index (CPI) dropped to 1.0% YoY versus 1.9% expected and 2.1% prior while the Producer Price Index (PPI) also declines to -1.4% from -0.8% previous readings and -1.3% market consensus.

Also read: China CPI in at 1.0% vs 1.9% expected, AUD unchanged

Apart from the downbeat Chinese inflation numbers, the market’s risk-off mood also seems to weigh on the AUD/USD price, mainly due to the pair’s risk-barometer status.

It’s worth noting that the US yield curve inversion keeps recession fears on the table while US President Joe Biden’s budget proposal acts as an extra catalyst to weigh on sentiment, as well as the AUD/USD price. That said, the benchmark US Treasury bond yields rose in the last three consecutive days and raised recession fears via the widest difference between the two-year and 10-year bond coupons since 1981 the previous day.

On the other hand, US President Joe Biden proposes raising corporation tax from 21% to 28% in his latest budget guide ahead of Friday’s release. Biden also aims for a 25% billionaire tax and large levies on rich investors. A likely lack of acceptance and political chaos due to the said budget proposal seems to weigh on the market sentiment of late.

With this, the S&P 500 Futures remain 0.05% down on a day and fail to mark any notable moves on a broader front by tracing Wall Street’s sluggish close.

Above all, the divergence between the Fed and the RBA policymakers’ latest bias, with Fed Chair Jerome Powell advocating higher rates while RBA Governor Philip Lowe signaling a policy pivot, keeps the AUD/USD bears hopeful.

Looking ahead, US Initial Jobless Claims for the week ended on March 03 will join the Challenger Job Cuts for February to offer more details to predict Friday’s top-tier employment data. Should the scheduled job numbers appear firmer, the AUD/USD bears may have a happy journey ahead.

Technical analysis

Although the oversold RSI conditions join the 0.6540-20 support zone to challenge AUD/USD bears, bulls remain off the table unless witnessing a clear upside break of a one-month-old previous support line, near 0.6615 by the press time.