AUD/USD slips 40 pips on mixed China PMI, upbeat Aussie inflation ahead of key US catalysts

• AUD/USD portrays a volatile reaction to Australia inflation data, China activity numbers.
• Australia Monthly Consumer Price Index jumps to 6.8% in April, China’s officials PMIs ease for May.
• Market sentiment dwindles amid mixed signals from data, risk catalysts.
• US House of Representatives’ voting on measures to avoid default, JOLTS Job Openings eyed for clear directions.

AUD/USD fails to cheer upbeat Australian inflation data for long as it refreshed its intraday high to 0.6540 before plummeting to 0.6498 on downbeat China activity data. Apart from the data, fears of US default and hawkish Fed bets also exert downside pressure on the Aussie pair.

Australia’s Monthly Consumer Price Index (CPI) for April rises 6.8% YoY versus 6.3% prior. Further, China’s official activity numbers for May came in mixed.

That said, China NBS Manufacturing PMI eases to 48.8 from 49.4 expected and 49.2 prior whereas Non-Manufacturing PMI rose past 50.7 market forecasts to 54.5 and 56.4 previous readings.

Earlier in the day, Reserve Bank of Australia (RBA) Governor Philip Lowe spread hawkish remarks while saying that “(He) will do what is necessary to make sure inflation comes back to target range in next few years.” It’s worth noting that the policymaker also said, “We're in data-dependent mode.”

Hence, the latest data fails to justify the hawkish remarks from RBA’s Lowe and hence exerts downside pressure on the AUD/USD pair.

Apart from the data, sluggish sentiment also weighs on the Aussie pair as the S&P500 Futures remain indecisive after a mixed Wall Street close while the US Treasury bond yields stay depressed of late. Furthermore, the US Dollar Index (DXY) inaction around 104.00, after snapping a six-day uptrend near the highest levels in 10 weeks, also please the AUD/USD pair sellers.

Having witnessed the initial reaction to a slew of data, the AUD/USD pair may witness a lackluster day ahead as markets may turn cautious ahead of the key US event, namely the House voting on the US debt ceiling deal. Also important to watch is the US JOLTS Job Openings for April, expected 9.375M versus 9.59M prior, as well as the Chicago Purchasing Managers' Index for May, likely to fall to 47.0 from 48.6.

Should the US Republicans bloc the debt limit extension, the market may witness a shock and the same can propel riskier assets, which in turn keeps the AUD/USD bears hopeful due to its risk barometer status. However, the US Dollar may not be able to cheer the same and hence can prod the bears provided the US data disappoints with a huge margin.

Technical analysis

AUD/USD remains bearish unless crossing the previous support line from March, around 0.6560 by the press time. That said, a three-week-old falling trend line, close to 0.6540 at the latest, guards the immediate recovery of the Aussie pair.

It’s worth noting that the downbeat RSI prods sellers even as MACD signals and the pair’s sustained trading below the previous key support hint at the quote’s further downside.