AUD/USD recovers lost ground and returns to levels close to 0.6300

• The aussie rebounds from six-month lows at 0.6170 and returns to 0.6300.
• The US dollar loses ground as the effect of the US CPI data diminishes.
• AUD/USD could depreciate below 0.6000 – ING.

The AUD is making a strong recovery during the American session on Thursday, erasing the losses of the previous day. The pair AUD/USD it has rebounded from 6-month lows at 0.6170, returning to levels just below 0.6300 and turning positive on the day.

The US dollar retreats from its highs

The US dollar loses ground and the Aussie recovers as the effect of the US inflation report begins to settle. Investors may be getting the idea that a 100 bp rate hike in November is quite unlikely, especially after the moderately dovish tone of the FOMC minutes in September.

According to US CPI data, prices accelerated at a 0.4% pace in September, well above expectations for a 0.2% increase, and annual inflation soared to 8.2%. These numbers fueled hopes that the Federal Reserve might raise borrowing costs at a more aggressive pace in November.

Fed Fund Futures have priced in a 13% chance of a 100 basis point rate hike immediately after the data release and the US dollar is up across the board. The Dollar Index (DXY) rallied to a fresh 20-year high at 114.70, only to drop to the 112.00 area at the time of writing.

AUD/USD could extend losses below 0.6000 – ING

Taking a longer-term perspective, ING FX analysts note that the Aussie is likely to extend its decline to levels below 0.6000: “We remain bearish on AUD/USD until the end of the year as fragility risk sentiment, China’s economic (and currency) woes and USD strength… A break below 0.60 this year is entirely possible.”

Technical levels to watch