AUD/USD is seen extending its corrective slide from eight-month peaks, and now drops further below 0.75 handle as markets prefer to capitalize the previous rally ahead of the crucial Chinese inflation numbers. Earlier this week, the awful trade balance data from China weighed down on the Aussie, although the trade data-led downward spike was temporary and the AUD bulls regained momentum and resumed its recent winning streak towards fresh multi-month tops. The trade data evidenced drop in exports by 25.4% in February on YoY terms, which is well below the 12.5% drop forecasted, with the trade surplus narrowed to USD 32.59bn in Feb, from USD 60.61bn reported previously. Feb CPI seen stabilizing at 1.8% y/y The Chinese Feb CPI and PPI data will be reported at 01.30GMT, with the consensus forecasts for CPI expecting no growth in the prices last month, leaving the price index unchanged at 1.8% y/y booked in Jan. While the factory gate prices are expected to decline 4.9% y/y, marking the weakest wholesale deflation rate in eight months, following a decline of 5.3% in January. The CPI data is likely to show that the annual rise in the Chinese consumer prices have remained at five-month highs in Fed, although well below the government target. Economist at Capital Economics believed, "A seasonal jump in food price inflation will have been the key driver. Food prices typically rise ahead of the Lunar New Year holidays, but the spike in vegetable prices has been sharper than usual this year. One reason is that credit and money supply growth have rebounded in recent months. And if we are correct in thinking that this will lead to stronger economic activity in coming quarters then a cyclical pick-up in broad price pressures seems likely." Meanwhile, analysts at ING noted, “February CPI and PPI data are due tomorrow at 9:30am local time. The consensus forecasts are 1.8% YoY for the CPI (prior 1.8%) and -4.9% for the PPI (prior -5.3%). The energy price shock slowed headline inflation to 1.4% in 2015 from 2.0% in 2014. The bounce to 1.8% in January from 1.6% in December came from a jump in the food component. We think it would take a big food supply shock or energy price spike to cross the PBOC’s inflation red line, which we believe is 3%. Our 2016 inflation forecast is 1.5% (consensus 1.6%).” AUD/USD key levels to watch on data Valeria Bednarik, Chief Analyst at FXStreet notes, “Technically, the 1 hour chart shows that the technical indicators eased some from extreme overbought territory, but are far from suggesting a downward move, while the 20 SMA heads higher around the mentioned 0.7460 level. In the 4 hours chart, the pair bounced from a still bullish 20 SMA earlier in the day, while the technical indicators have lost upward strength near overbought levels, but are also far from signaling a downward move, meaning some consolidation could be expected before a new leg north. Support levels: 0.7460 0.7420 0.7375 Resistance levels: 0.7530 0.7585 0.7610.” For more information, read our latest forex news.