- AUD/USD teeters below 0.6500 and ends the week around the mid-range of 0.6400-0.6500.
- The US core consumer price index beat estimates, opening the door for a new Fed tightening.
- Brainard and Daly of the Fed reiterated that further hikes are expected.
- Strong resistance around the 0.6468-87 area could limit any AUD/USD recovery.
The AUD/USD falls in the North American session due to the improvement of the market sentiment, portrayed by the advance of the American actions, in the middle of a crossing of cables of Fed officials who reiterate the need to raise the types after the Fed’s inflation gauge for August has risen surprisingly.
At time of writing, the AUD/USD is trading at 0.6445, 0.83% below its opening price, having reached a daily high of 0.6523 earlier during the European session.
The US Federal Reserve’s favorite measure of inflation, known as PCE, rose more than estimated, rising 0.3% MoM in August and 6.2% YoY, while core PCE, which removes volatile items, accelerated to a 0.6% mom pace, up 4.9% yoy, the US Commerce Department reported.
Therefore, with jobless claims in the last week down and inflation continuing to head north, the case for further Fed tightening is strengthened. Meanwhile, money market futures see a 68% chance the Fed will hike 75 basis points at the November meeting, up from 61% before the US inflation report.
Later, Fed Vice Chair Lael Brainard claimed that the Fed needs to keep interest rates high for quite some time as part of the central bank’s effort to bring inflation closer to the 2% target. Brainard added that she is too early to declare victory over inflation, she said that (the Fed) would not withdraw prematurely, and commented that the peak of the Federal Funds Rate (FFR) is not clear now.
Echoing his comments, Mary Daly of the San Francisco Fed said further rate hikes are inevitable and stressed that the Fed is “determined” in its mission to reduce inflation.
Meanwhile, the final reading for the University of Michigan Consumer Confidence came in at 58.6, lower than previously reported. However, one-year inflation expectations rose to 4.7% from 4.6%, while five-year inflation expectations slowed to 2.7% from 2.8% previously.
As for the Australian dollar, China’s PMI was mixed, with the official report remaining in expansionary territory. On the contrary, the Caixin Manufacturing PMI did not meet expectations, in contractionary territory, blamed on the Covid-19 containment measures.
AUD/USD Technical Analysis
AUD/USD dipped from weekly highs to near 0.6500, extending its losses, although it is headed to end the week near the middle of the weekly range. However, it is worth noting that the RSI is heading south again, which suggests that the sellers are gaining momentum. In the short term, the one hour scale of the AUD/USD could limit any recovery around the 0.6468-87 zone, occupied by the confluence of the 100, 50 and 20 EMAs around that region, further reinforced by the daily pivot point. Therefore, the AUD/USD has a bearish bias.
AUD/USD Key Technical Levels
Source: Fx Street
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