• Persistent US-China trade tensions continue to weigh on the Aussie.
  • Softer Chinese PPI figures prompt some fresh selling on Wednesday.
  • A subdued USD demand helps limit the downside ahead of the US CPI.

The AUD/USD pair remained depressed through the Asian session on Wednesday and dropped to near 1-1/2 week lows in the last hour.

The pair came under some renewed selling pressure on Wednesday and finally broke down of its overnight consolidative trading range in reaction to mixed Chinese inflation figures. In fact, Chinese consumer inflation, as measured by the headline CPI rose at an annualized pace of 2.7% in May as against 2.5% in April, while producer price index decelerated to 0.6% from 0.9% previous.

Meanwhile, the downside remained limited, at least for the time being, amid a mildly negative tone surrounding the US Dollar, which continues to be weighed down by firming market expectations that the Fed will be forced to cut interest rates sooner rather than later. Rate cut bets increased further after the US President Donald Trump's latest complain that the Fed was keeping interest rates way too high.

It, however, remains to be seen if the pair is able to attract any meaningful buying interest or the current pullback marks the resumption of the prior well-established bearish trend led by fears of a further escalation in trade tensions between the world's two largest economies, which has been one of the key factors denting sentiment surrounding the China-proxy Australian Dollar.

Moving ahead, Wednesday's economic docket – highlighting the release of the latest US consumer inflation figures, might influence the USD price dynamics and contribute towards producing some short-term trading opportunities later during the early North-American session.

Technical levels to watch