AUD/USD remains well offered below 0.6500, its lowest level since November, against a backdrop of USD strength

• The AUD/USD pair is under intense selling pressure and falls to its lowest level since November.
• Disappointing Chinese PMI data dwarfs stronger consumer inflation figures in Australia.
• This combination of factors lifts the dollar to a two-month high and puts pressure on the pair.

The AUD/USD pair attracts new sellers after an early rally to the 0.6535-0.6540 zone on Wednesday and continues to lose ground during the first half of the European session. This is the second consecutive day down and drags the pair to the lowest level since November 10, around the 0.6475 area in the last hour.

The Australian dollar (AUD) rose slightly after the release of stronger domestic consumer inflation data, which could force the Reserve Bank of Australia (RBA) to further tighten monetary policy. Indeed, RBA Governor Philip Lowe had warned today that price stickiness could invite the central bank to raise rates further. However, the AUD/USD pair is struggling to take advantage of the intraday rally after disappointing Chinese macroeconomic data sparked fears of a slowdown in the global economy.

The National Statistics Office (ONE) reported on Wednesday that the activity of Chinese factories contracted faster than expected in May. In addition, Chinese services activity expanded at the slowest pace in four months. Aside from this, concerns about worsening US-China ties dwarf optimism about raising the US debt ceiling. This, in turn, curbs investor appetite for riskier assets, which, along with resurgent demand for US dollars (USD), weighs on the risk-sensitive Aussie.

In fact, the dollar index (DXY), which tracks the dollar against a basket of currencies, jumps to record highs since mid-March and remains well supported by expectations that the Federal Reserve (Fed) will maintain interest rates. higher for longer. Indeed, current market valuation indicates a higher probability of another 25 basis point hike at the next FOMC policy meeting in June, and bets were bolstered by the US Consumer Staples Price Index released on Friday, which showed that inflation remains stable.

Apart from this, the risk aversion momentum lends additional support to the safe-haven dollar. Meanwhile, the global flight to safety leads to a further decline in US Treasury yields, which could stop USD bulls from making aggressive bets and help limit losses for the pair. AUD/USD, at least for now. However, the aforementioned fundamental background suggests that the path of least resistance for spot prices is to the downside and any attempt at recovery is likely to be sold.

Also, the sustained break and acceptance below the key 0.6500 psychological level validates the negative outlook. Market participants are now closely watching the US economic calendar, with the release of Chicago PMI data and JOLTS Job Openings figures early in the American session. Traders will also take into account the speeches of the influential members of the FOMC. This, coupled with US bond yields and broader risk sentiment, will support the US dollar and provide some lift to the AUD/USD pair.

technical levels