- A combination of factors pushed AUD / USD higher for the third day in a row on Wednesday.
- Risk appetite and stronger Australian CPI benefit AUD.
- A subdued USD price action does little to provide any momentum or stop the intraday bullish movement.
The pair AUD/USD moving higher during the European session on Wednesday and holding comfortably above the 0.7500 level. At time of writing, the pair is pulling back to the 0.7520 region, up 0.28% on the day, after setting a high at 0.7536 earlier in the day.
The pair has gained traction for the third day in a row and jumped to new weekly highs on Wednesday following the release of Australian consumer inflation figures. The headline CPI rose 0.8% in the third quarter, as expected, and the annual rate slowed to 3.0% from the previous 3.8%. However, the Reserve Bank of Australia’s adjusted mean inflation rose 0.7% during the July-September period, pushing the annual pace above the 2% level for the first time since 2015.
The data could increase pressure on the RBA to further reduce its monetary stimulus in the near future, which was evident by an increase in yields on shorter maturing Australian government bonds. This, together with the prevailing risk appetite sentiment, has provided a good boost to the higher perceived risk Australian dollar. Aside from this, a subdued US dollar price action has continued to support the positive intraday momentum of the AUD / USD pair near the multi-month highs touched last Thursday.
The USD has struggled to capitalize on the gains of the previous day led by stronger US macro data and has remained on the defensive, although prospects for an early tightening of monetary policy by the Fed have acted like a tailwind. Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response in 2022 to contain stubbornly high inflation. Therefore, the market focus will remain on the release of the underlying US PCE price index on Friday.
Beyond this, Thursday’s preliminary US Q3 GDP report will set the tone for next week’s RBA and FOMC monetary policy meetings. Investors, meanwhile, could take cues from Wednesday’s release of US durable goods orders data. This, along with US bond yields and broader market risk sentiment, will influence price dynamics around the US dollar and could generate some opportunities around the AUD / USD pair.
AUD / USD technical levels
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