- AUD/USD finds itself aggressively bid and sinks to its lowest level since April 2020.
- Dollar strengthens across the board after US CPI report and puts pressure.
- The risk-averse state also helps drive flows away from the risk-sensitive Aussie.
The pair AUD/USD comes under intense selling pressure during the early North American session and sinks to its lowest level since April 2020 in reaction to stronger US consumer inflation figures.
In fact, the US Bureau of Labor Statistics reported that the headline CPI rose 0.4% month-on-month (0.2% expected) and the annual rate eased to 8.2% from 8.3% in August, though still higher than 8.1% estimated. Furthermore, core inflation, which excludes food and energy prices, held at 0.6% during the reported month and accelerated from 6.3% to 6.6% year-on-year, the highest since August 1982.
This is because the Federal Open Market Committee (FOMC) Minutes published on Wednesday are more restrictive and increase the bets for a more aggressive adjustment of the Fed’s monetary policy. In fact, the Markets have begun to value the possibility of a 100 basis point Fed interest rate hike in November. This, in turn, pushes the yield on the benchmark US Treasury note past the 4% threshold and boosts the dollar.
Apart from this, a new wave of global risk sentiment – as evidenced by another round of selling in equity markets – underpins the safe-haven dollar and weighs on the risk-sensitive Aussie. Apart from this, technical selling below the previous year’s low around the 0.6235 region further aggravated the bearish pressure surrounding the AUD/USD pair and contributes to the sharp decline.
That said, the slightly oversold conditions on the intraday charts prevent the bears from placing further bets and limit the AUD/USD’s decline, at least for now. However, the fundamental background suggests that any recovery attempt could be seen as a selling opportunity and risks fading quickly amid looming recessionary risks.
Technical levels to watch
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
