- AUD/USD gets aggressive bids amid broad dollar sell off by US CPI.
- Weaker data shatters expectations of a further Fed rate hike and weighs on the dollar.
- The risk appetite boost further undermines the dollar and benefits the risk-sensitive Aussie.
The pair AUD/USD rises to its highest level since June 16 in reaction to softer US consumer inflation figures and now appears to have stabilized around the 0.7055-0.7060 region.
The US dollar is selling off and slumps to a five-week low during the early North American session, which in turn provides a strong boost to the AUD/USD pair. The dollar’s intraday decline follows the release of the US CPI report, which points to a easing of inflationary pressures. Markets react quickly and push back expectations of more aggressive policy tightening by the Fed.
In fact, the odds of a 75 basis point Fed rate hike in September fall to 35% from the pre-CPI 80% and cause a sharp drop in US Treasury yields, which , in turn, weigh heavily on the dollar. Apart from this, a new wave of global risk appetite – as evidenced by bullish sentiment around equity markets – further undermines the safe-haven dollar and benefits the risk-sensitive Aussie.
This coupled with technical buying above the key psychological 0.7000 level has contributed to the strong offer tone surrounding the AUD/USD pair. A further move beyond the previous monthly high, around the 0.7045 region, could have already set the stage for further gains. With that being said, the overbought RSI on the hourly charts is preventing the bulls from making further bets, at least for now.
However, the AUD/USD pair seems poised to extend its upward trajectory and reclaim the 0.7100 level. Follow-up buying beyond that toehold should pave the way to challenge the all-important 200-Day SMA, currently around 0.7150. This last point could curb the pair’s gains and serve as a benchmark for traders.
Technical levels
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.
