- The aussie reversal from 0.7300 finds support at 0.7225.
- The US dollar rebounds, driven by inflationary fears.
- AUD / USD retests September low at 0.7170 – Credit Suisse.
The Australian dollar’s pullback from the 0.7300 area has found support at a week-long low of 0.7225. The pair AUD/USD is trying to cut losses in the US trading session on Wednesday and has returned to the middle of the range at 0.7200.
Inflation Concern Drives US Dollar Recovery
The risk-sensitive AUD lost momentum on Wednesday, following a three-day rally that was capped again at the 0.7300 / 20 resistance area. The pair cut against a firmer US dollar, favored by safe refuges flows amid concerns about the economic consequences of rising inflation.
Global stocks are moving into negative territory with government bond yields rising as energy prices rise. With crude hitting seven-year highs, they are increasingly cautious that inflationary pressures could hamper the post-pandemic recovery and force the Federal Reserve to accelerate its monetary normalization process.
On the macroeconomic front, the US ADP report has anticipated a 568,000 increase in private payrolls in September, beating market expectations of a 428,000 increase. If these figures are confirmed by Friday’s labor report, the Fed could have another source of pressure to begin reversing its quantitative easing program.
AUD / USD Likely to Test September Low at 0.7170 – Credit Suisse
From a technical perspective, Credit Suisse currency analysts note that the short-term AUD / USD trend is skewed to the downside, with a retest at the 0.7170 low on the cards: “Falling iron ore prices since July it has challenged the notion that the AUD may strengthen due to its exposure to commodities. Widespread commodity strength unlikely to be helpful to AUD (…) we lowered our AUD / USD target range from 0.7100-0.7450 to 0.7050- 0.7400 for Q4 – already constructive growth and valued policy outlook before the key reopening dates make us see that the AUD is asymmetrically exposed to the downside in the short term. “
Technical levels
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