AUD/USD struggles at 0.7100 and falls on USD strength

• The AUD/USD pair falls below the psychological level of 0.7100 in the absence of further impulses.
• The US Federal Reserve’s monetary policy decision keeps traders in check, dampening their spirits.
• Australian Retail Sales will be released later, while Chicago PMI and Consumer Confidence will update on the US economy.

The pair AUD/USD Pulls back after hitting a daily high at 0.7120 as the US dollar regains ground against most G8 currencies, supported by high US Treasury yields and sour sentiment as evidenced by falling US stocks . At the time of writing, the AUD/USD pair is trading at 0.7076.

US economic data begins to support the Fed’s soft landing

A risk-off impulse keeps investors on the sidelines ahead of the US Federal Reserve’s (Fed) policy decision on Wednesday. AUD/USD continues to fall, with eyes set on testing the January 25 daily low at 0.7032, which, once conquered, could bring the 0.7000 level into play. Last week’s US economic data, with fourth-quarter Gross Domestic Product (GDP) higher than estimates but lower than third-quarter data, justified a group of Fed officials backing rate hikes. lesser rates.

In addition, a Fed inflation gauge known as core Personal Consumption Expenditure (PCE) fell from 4.7% in November to 4.4% on an annual basis last month. On the other hand, according to a survey by the University of Michigan (UM), US consumer confidence improved, while inflation expectations fell.

That said, the US Federal Reserve (Fed) is expected to raise rates by a quarter of a percentage point (0.25%) on Wednesday, ending the era of more than 75 hikes that raised the funds rate. federal (FFR) up to the range of 4.25-4.50%.

The US Dollar Index (DXY), which measures the value of the dollar against a basket of currencies, continued to gain ground and retraced the 102,000 level, up 0.15% to 102,079. Meanwhile, the 10-year US Treasury yield extended its gains, up four basis points (bp) to 3,546%.

What must be considered?

The Australian economic calendar will include housing data and the latest update on Retail Sales, which are expected to fall as low as -0-3% MoM. In the United States, the Employment Cost Index (ECI), housing data, the Chicago PMI and consumer confidence will be published on Tuesday.

AUD/USD Key Technical Levels