AUD/USD retreats towards 0.7100 on downbeat China data

• AUD/USD struggles to defend the four-day uptrend at the highest levels since early June.
• China’s Retail Sales eased to 2.7%, and Industrial Production growth also slowed down to 3.8% YoY in July.
• Sour sentiment challenges bulls around multi-day high, US dollar weakness probe bears.
• Second-tier US data, risk catalysts to trace for intraday directions.

AUD/USD retreats towards 0.7100, down 0.08% intraday around 0.7120 by the press time, as China’s softer-than-expected data dump joins the cautious mood in the market during Monday’s Asian session. The Aussie pair’s struggle could also be linked to the anxiety ahead of the Minutes of the latest monetary policy meeting from the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed).

China’s Retail Sales eased to 2.7% versus 5.0% expected and 3.1% prior whereas Industrial Production (IP) edged lower to 3.8% from 3.9% prior and 4.6% market forecasts.

Earlier in the day, the People’s Bank of China (PBOC) cut the one-year medium-term lending facility (MLF) rates by ten basis points (bps) and tried to push back the bears. Also positive for the market sentiment were better-than-previous Japan GDP growth numbers. However, the increased count of US lawmakers visiting Taiwan challenges the sentiment amid the Sino-American ties over US House Speaker Nancy Pelosi’s visit to Taipei.

Elsewhere, softer prints of the US Consumer Price Index (CPI) and the Producers Price Index (PPI) managed to ease the market’s inflation fears. Even so, Richmond Federal Reserve (Fed) Bank President Thomas Barkin said on Friday that he wants to raise interest rates further to bring inflation under control. "I'd like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory," Barkin told CNBC, per Reuters. San Francisco Fed President Mary Day, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans were among the Fed hawks who kept favoring higher rates.

In summary, having witnessed the initial market reaction to China’s monthly data dump, AUD/USD traders should pay attention to NY Empire State Manufacturing Index for August, expected at 8.5 versus 1.1 prior. Although softer prints of the US PMI data could probe the AUD/USD bulls, the downside remains elusive ahead of Tuesday’s RBA Minutes, Australia’s Wage Price Index for the second quarter, up for publishing on Wednesday, as well as Thursday’s Aussie jobs report. Additionally, headlines surrounding China and US ties will join the RBA Minutes to entertain Aussie pair traders.

Technical analysis

The 200-DMA restricts immediate AUD/USD upside to around 0.7120, which joins sluggish RSI at the higher end to suggest that the AUD/USD bulls are running out of steam. The pullback moves, however, remain elusive until the quote stays beyond the previous resistance line from late April, at 0.6990 by the press time.