AUD/USD pays no heed to China inflation numbers

• China consumer price index (CPI) and producer price index (PPI) bettered estimates, but are doing little to lift the Aussie dollar.
• For the AUD, the path of the least resistance is to the downside, courtesy of strong US jobs report, widening US-AU yield differential and escalating US-China trade tensions.

The Aussie dollar remains on the defensive after the release of a better-than-expected China inflation data.

At press time, the currency pair is trading at 0.7110, having dropped to 0.71 earlier today- the lowest level since February 2016.

China CPI rose 2.3 percent year-on-year in August, beating the estimated rise of 2.1 percent, following a 2.1 percent rise in July. Meanwhile, PPI, also known as factory-gate inflation, dropped to 4.1 percent in August from the July print of 4.6 percent but bettered estimate of 4.1 percent.

The drop in the PPI is bad news for metals and commodity dollars like the AUD and could only add to the bearish tone around the Aussie dollar.

The currency risks falling below the psychological support of 0.71 on the back of the Friday's upbeat US jobs report, rising Treasury yields and Trump's threat to up the ante in the trade war with China.

AUD/USD Technical Levels

Support: 0.7067 (daily pivot S1), 0.7031 (daily pivot S2), 0.70 (psychological support)

Resistance: 0.7144 (Sep. 5 low resistance as per 1H chart). 0.7164 (downward sloping 50-hour moving average), 0.72 (psychological hurdle)