AUDUSD falters below 0.6700 on risk aversion

• The aggressive comments from Fed spokespeople soured sentiment and bolstered the US dollar.
• Risk aversion weighed on riskier currencies in the currency space, such as the Australian dollar.
• US housing data disappointed, while jobless claims fell below estimates, suggesting labor market tightness.
• AUDUSD Price Analysis: Still neutral-bullish bias, but pullback could extend towards 0.6500 before resuming uptrend.

The Australian dollar (AUD) slumped against the US dollar (USD), as comments from Federal Reserve (Fed) officials have aggravated trader sentiment, as evidenced by the fall in US stocks. AUDUSD is trading at 0.6688, down nearly 1%, after hitting a daily high of 0.6751.

The hawkish comments from the Federal Reserve boosted the dollar.

On Thursday, St. Louise Fed President James Bullard commented that monetary policy is not “tight enough,” adding that rates need to rise further, within the 5% to 7% zone, which scared to investors. Lately, Cleveland Fed President Loretta Mester echoed her comments, saying inflation is too high.

Meanwhile, a series of mixed US economic data was released on Thursday. The number of housing starts in October contracted more than the 1.3% in September, and building permits plunged 2.4% mom in October, compared to a 1.4% expansion in September.

In terms of the labor market, initial US jobless claims for the week ending November 12 fell by 222,000, down from 225,000 expected and down from 226,000 the week before. By contrast, Continuation Claims increased by 13,000, to 1.51 million, in the week ending November 5, rising for the fifth week in a row, an upward trend that signals Americans are out of work for longer.

On the other hand, the Dollar Index, an indicator of the value of the dollar against a basket of six currencies, remains above its opening price by 0.58%, at 106.902, supported by the rise in Treasury yields The United States, with the US 10-year yield rising nine basis points, trading at 3.781%, after hitting a weekly low of 3.671%.

Australian jobs data warrants fresh RBA action

Earlier in the Asian session, Australian jobs numbers beat estimates. The employment change indicator rose by 32,200, above estimates of 15,000, while the unemployment rate fell to 3.4%, below forecasts of 3.5%. According to analysts at TD Valores Bursátiles: “The stronger-than-expected jobs report should also dampen hopes of an imminent pause by the Reserve Bank of Australia (RBA) after Bullock, deputy governor of the RBA will comment that the high point of the inflation cycle is near. Therefore, we continue to expect the Bank to continue with the increases of 25 basis points until the first quarter of next year.”

AUDUSD Price Analysis: Technical Perspective

Against this backdrop, the AUDUSD plunged below 0.6700, extending its losses beyond the 100 day EMA at 0.6694. Although the inverted head and shoulders pattern is intact, the Relative Strength Index (RSI) peaked around 66, and with its slope heading lower, it suggests that the buying pressure is fading. If sellers break above the neckline around the confluence of the 50 day EMA at 0.6495, the pattern would be invalidated; otherwise, the chart pattern remains in play.

AUDUSD key support levels are at the weekly low of 0.6633, followed by the psychological level of 0.6600, ahead of the 0.6500 signal. On the other hand, the first resistance for AUDUSD would be the 100 day EMA at 0.6694, followed by the weekly high at 0.6797, before 0.6800.