- US annual inflation rate falls to lowest level since January.
- The dollar collapses on expectations of a less aggressive Fed.
- AUDUSD is headed for the highest daily close since September 22nd.
The AUDUSD spiked after the release of US inflation figures, disappointing expectations. Speculation about a smaller rate hike by the Federal Reserve sank the dollar. The pair reached 0.6564, the highest level since the end of September.
Before and after the CPI
The US Consumer Price Index (CPI) rose 0.4% in October, below the 0.6% market consensus. The annual reading fell to 7.7%, the lowest level since January. The figures sent Wall Street and Treasuries up sharply. “Evidence is mounting that inflation has peaked and is now falling again. Therefore, the Fed’s next rate hike is likely to be lower,” analysts at Commerzbank said.
Expectations of a less aggressive Fed pushed the dollar sharply lower and it still looks vulnerable. AUDUSD has broken above the 0.6520/40 area again, which is a major technical area. As long as it is above, further gains seem likely.
On Wednesday, AUDUSD fell to 0.6390, matching the 20-day SMA, which is now clearly heading north, suggesting a bottom has been established, at least in the short term. A potential target for the current recovery could be seen at 0.6700/10. Before that level, resistance levels are located at 0.6615 and 0.6665.
USD daily chart
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Source: Fx Street
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