China PPI decelerates; AUD/USD keeps the bid tone

The deceleration in the Chinese Producer Price Index (PPI), also known as the factory-gate prices, showed the wheels are coming off the ‘global reflation’ wagon.

However, the weaker-than-expected PPI number has not done any damage to the AUD/USD pair, which remains well bid around 0.7357 levels.

The fluttering base effect saw the PPI cool down to 6.4% y/y in April. The number was expected to drop to 6.7% from 7.6%. China’s crackdown on the leverage and the weakness in the commodity prices means the factory-gate inflation may cool further in the days ahead. Meanwhile, the consumer price index (CPI) bettered estimates.

The AUD being a proxy for China and a risk currency could suffer losses if the global markets turn risk averse in response to weaker-than-expected China PPI data.

AUD/USD Technical Levels

A break above 0.7367 (May 5 low) would open doors for 0.74 (zero figure) and 0.7440 levels (Apr 27 low). On the downside, break below 0.7328 (previous day’s low) would open up downside towards 0.7285 (June 2016 low), under which a major support is seen directly at 0.7160 (Dec low).