Australian Dollar remains on the front foot vs weak USD after China's inflation data

The Australian Dollar (AUD) remains on an upward trajectory against the weak US Dollar (USD) following China's recent inflation data release. The AUD/USD pair trades around the 0.7220-0.7225 level, just below its highest point since May 14. China's National Bureau of Statistics reported a year-on-year increase of 0.8% in the headline Consumer Price Index (CPI), climbing from 0.5% previously.

On a monthly basis, the CPI stood at 0.4%, surpassing market expectations of a 0.3% increase. The Producer Price Index (PPI) also rose 3.8% year-on-year in August, exceeding estimates. Despite this data release, the AUD/USD pair does not seem to gain significant momentum. Factors such as the growing probability of the Reserve Bank of Australia (RBA) raising interest rates and the Bank of Japan (BoJ)-inspired Japanese Yen (JPY) rally continue to bolster the AUD/USD pair.

Traders are hesitant to make significant directional bets before the release of the latest US inflation figures, which will be published later in the week. The US Producer Price Index (PPI) and the US Consumer Price Index (CPI) are expected to be released on Thursday and Friday, respectively. These data points may shed more light on the US Federal Reserve's (Fed) policy direction, influencing USD demand and the AUD/USD pair.

Currently, the AUD/USD pair trades above its 200-day Simple Moving Average (SMA) of 0.6996, which indicates a positive near-term bias. Traders may continue to buy AUD dips to support the medium-term trend floor near 0.7000. On the upside, bulls could target a multi-year peak around 0.7270-0.7275, potentially paving the way for further gains.