AUD/USD's recovery from session low stalls after weak China PPI

• AUD/USD struggles to print gains as China reports a bigger-than-expected drop in PPI. 
• Consumer inflation also rose at a slower pace in May.
• Dismal Aussie Home Loans data could be adding to bearish pressures around the AUD.

AUD/USD's recovery from the session low of 0.6933 looks to have stalled near 0.6960 following the release of the weaker-than-expected China producer price index (PPI). 

According to the National Bureau of Statistics, the PPI, which measures costs for goods at the factory gate, fell 3.7% year-on-year in May versus expectations for a 3.3% decline, having dropped by 3.1% in April. 

The deflation in factory-gate prices could be associated with the slowdown caused by the coronavirus outbreak and the resulting slump in global commodity prices. A weaker PPI, therefore, is bad news for the commodity-sensitive currency like the Australian dollar. 

The PPI data came along with the release of the consumer price index, which showed consumer inflation rose 2.4% year-on-year in May, missing the forecast for a 2.7% rise following April's 3.3% gain. 

Apart from the weak PPI, the dismal domestic data seems to have put brakes on AUD's recovery. The number of Home Loans fell by 4.4% in April, extending the 0.9% drop seen in March, the data released by the Australian Bureau of Statistics showed. The number indicates a declining level of consumer confidence in the housing sector and is a bearish development for the Aussie dollar. 

Even so, the AUD could rise during the day ahead if the risk assets put on a good show, erasing Tuesday's decline. At press time, the futures tied to the S&P 500 are reporting a 0.5% rise. 

Technical levels