China PPI ticks higher in April, will it help the AUD/USD regain poise?

• China producer price index (PPI), also known as factory-gate prices, ticked higher in April.
• The uptick in PPI could put a bid under commodities and oversold AUD.  
• China consumer price index growth slowed more than expected.

China producer price index (PPI) increased 3.4 percent year-on-year in April from the March reading of 3.1 percent.  

The PPI, also known as factory-gate prices, is a good indicator of demand for commodities. It is worth noting that the sharp rise in Chinese PPI in mid 2016/early 2017 was primarily responsible for the global reflation trade.

So, an uptick in the PPI could put a bid under commodities and the oversold Aussie dollar.  So far, the AUD/USD pair has added only about 15 pips and is reporting marginal gains at 0.7475.

China CPI dropped 0.2 percent month-on-month, dragging the annualized figure down to 1.8 percent from the previous month's print of 2.1 percent. The drop in the CPI may keep AUD gains under check. That said, an uptick in Chinese PPI, if followed by a weak US CPI number (due later today), could yield a bigger move in the AUD/USD pair.

AUD/USD Technical Outlook

The 14-day relative strength index (RSI) shows oversold conditions. So, a corrective rally could be in the offing. The momentum studies are biased bearish - 5,10 MA are trending south.

The resistance is lined up at 0.7486 (5-day MA), 0.7505 (10-day MA) and 0.7528 (May 8 high) and support is seen at 0.7450 (session low), 0.7434 (May 8 low) and 0.7412 (previous day's low).