When is the China CPI/PPI reading, and how could it affect the AUD/USD?

China CPI/PPI Overview

Early Thursday sees the next installment of China's inflation measures, with the y/y Consumer Price Index and Producer Price Index figures dropping at 01:30 GMT. China's year-on-year CPI into July is expected to hold steady at 1.9%, in-line with the previous printing, while July's y/y PPI is forecast to come in at 4.4%, a clip lower than the previous reading's 4.7%. Trade war concerns between the US and China are seeing added emphasis on China's trade and growth figures, but with the latest round of Trade Balance figures declining by a moderate yet controlled pace, traders are worried that an acceleration of trade woes could further dampen economic growth and activity in China, which would see plenty of knock-on declines for Australia's still-struggling economy.

How could it affect the AUD/USD?

Chinese officials have begun to make moves to support China's economy in case of a trade war slowdown, but forex markets are delaying running for the exits as they wait for further signs of negative impact from round-turn tariffs between the US and China. A slow decline in headline trade and inflation figures for China would be a bad omen for Aussie traders, but far less so than a rapid spin-out of economic indicators, and market expectations for the AUD could remain hopeful as long as today's inflation figures don't miss the mark too bad. A bullish bias appears to have built into the beleaguered Aussie, as noted by FXStreet's Valeria Bednarik: "the sharp recovery suggests that bulls are willing to challenge bears' determination right above the current level, and technical readings in the 4 hours chart support so, as indicators resumed their declines after nearing their midlines, while the pair settled firmly above a bullish 20 SMA, which advances above the larger ones. The key is still 0.7483, July high, as sellers will likely give up on a break above this last."

Support levels: 0.7400 0.7370 0.7330  

Resistance levels: 0.7445 0.7485 0.7520

Key notes

China Trade balance unaffected by trade war

AUD/USD analysis: bulls willing to challenge bears' determination

About the China CPI release

The Consumer Price Index is released by the National Bureau of Statistics of China. It is a measure of retail price variations within a representative basket of goods and services. The result is a comprehensive summary of the results extracted from the urban consumer price index and rural consumer price index. The purchase power of the CNY is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. A substantial consumer price index increase would indicate that inflation has become a destabilizing factor in the economy, potentially prompting The People’s Bank of China to tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, while a low reading is seen as negative (or Bearish) for the CNY.

About the China PPI release

The Producer Price Index released by the National Bureau of Statistics of China is a measurement of the rate of inflation experienced by producers. It captures the average changes in prices received by Chinese domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Changes in the PPI are widely considered as an indicator of commodity inflation. If the Producer Price Index increase is excesive, it would indicate that inflation has become a destabilizing factor in the economy, The People’s Bank of China would tighten monetary policy and fiscal policy risk. Generally speaking, a high reading is seen as positive (or bullish) for the CNY, whereas a low reading is seen as negative (or bearish) for the CNY.