At 3-week lows, AUD/USD finds no respite from Aussie home loans, China inflation data

AUD/USD remains at the three-week low of 0.7862 after the data released in Australia showed the home loan growth slowed to 0.5% m/m in July vs. expected figure of 1.5%. 

Meanwhile, Chinese July PPI came-in as expected at 5.5%. The CPI printed at 1.4%, missing the estimate of 1.5%. 

The Aussie home loans data add credence to the possibility of the housing market slowdown and could weigh over the AUD. The currency could have regained poise if the Chinese PPI had printed higher than estimate. Moreover, it would have signaled the ‘great reflation’ trade is gathering pace again. 

Don’t trust the yield spread

The spread between the Aussie and the US 10-yr bond yield stands at 39 basis points. The 10-yr treasury yield is down 3 basis points, while its Aussie counterpart remains unchanged. 
Ideally, the drop in the Treasury yield should support the AUD/USD pair. However, the weakness seen in the yield today represents the heightened demand for the safe haven Treasuries [and USD] in the wake of heightened tensions in the Korean Peninsula. 

AUD/USD Technical Levels

The 4-hour chart shows a nice rounding top formation. A breakdown of support at 0.7831 [23.6% Fib R of 2011 high - 2016 low] would expose 0.78 [zero figure] and 0.7784 [38.2% Fib R of 0.7328-0.8066]. On the higher side, only a break above 0.7887 [previous day’s low] would open up upside towards 0.7913 [5-DMA] and 0.7945 [10-DMA].