AUD/USD Looks To Extend Post-NFP Bearish Breakdown Amid Strong U.S. Dollar, U.S. CPI Awaited
- AUD/USD pair attracts fresh selling on Tuesday and snaps a modest rebound from the vicinity of the 0.62769 level
- Rising treasury bond yields boosted by aggressive rate hike bets lift off U.S. Dollar index to its 52-week high of 114.75 level
- Jobs Data comes in line with market expectations
- Reserve Bank of Australia's (RBA) dovish signal continues to weigh down on the Aussie dollar
AUD/USD cross struggled to capitalize on the modest overnight rebound from the vicinity of the 0.62769 level and attracted fresh selling on Tuesday during the early-Asian session. The pair managed to retrace a few pips from the daily high and was last seen trading in modest losses just below the 0.62900 mark heading into the European session. Rising treasury bond yields bolstered by market expectations that the fed would continue to hike its interest rates in its upcoming monetary policy meetings saw the U.S. Dollar index, which measures the greenback's performance against a basket of currencies, rise by 0.36% to 113.08 to move closer to its 52-week high of 114.75 on Monday. This, in turn, offered some support to the AUD/USD pair.
Further uplifting the US Bond yields were last week's jobs data, which aligned with market expectations and showed a resilient jobs market. The U.S. economy added 263,000 jobs last month against a Dow Jones expectation of 275,000, according to the latest NFP report released by the U.S. Department of Labor. According to the report the unemployment rate fell by 3.5% vs the forecast of 3.7% as the labor force participation rate edged lower to 62.3% and the size of the labor force decreased by 57,000. Following the report's release, retail traders have now priced in a likelihood of a 75basis point rate hike at next month's Federal Reserve Meeting. Fed Fund's future and overnight index swaps(OIS) are now pricing a near 100% chance for a more significant rate hike.
That said, the market sentiment remains fragile amid growing worries of a deeper global economic downturn, a further escalation in geopolitical tensions stemming from the situation in Ukraine and Russia, and the renewed US-China trade jitters.
The United States published a broad list of export controls late last week. The Biden administration's move targets China's ability to access US-born semiconductors. It is perhaps the highest-profile move against China since the US-China trade war started in 2018. That said, the combination of factors supports furthering the greenback toward reaching new highs.
On the Australian docket, the Aussie Dollar continues to be undermined by the dovish signal of the Reserve Bank of Australia(RBA), which decided to slow down the pace of tightening. This, in turn, remains supportive of further downside moves, especially as the Federal Reserve looks ready to continue hiking at an accelerated pace. That said, the Australia Consumer Confidence data from Westpac for August and October final building permits will be very important in determining the next directional move for the Aussie dollar. Additionally, Reserve Bank of Australia(RBA) Assistant Governor Luci Ellis's speech tomorrow will be keenly followed by retail traders as she will drop subtle clues regarding future monetary policy. The primary focus shifts to the upcoming U.S. Consumer Price Index data(CPI) due on October 13. Analysts expect core inflation-a measure better suited to predict the Fed's monetary policy actions-to cross the wires at 6.5% from a year ago, a figure higher than the prior month's 6.3%.
Technical Outlook: Four-Hour Price Chart
From a technical perspective, using a four-hour price chart, the price looks to extend the downward trajectory after breaking last week from a bearish flag chart pattern. Further downside moves by sellers would drag spot prices toward testing the lower trendline of the descending channel pattern plotted from the 1st September swing low. If sellers breach the aforementioned support level, this would negate any near-term positive outlook and pave the way for aggressive technical selling around the AUD/USD pair. The downward trajectory could then accelerate toward the 0.62531 support level. A breach below the aforementioned floor exposes the pair to more losses.
All the technical oscillators are in negative territory. That said, the RSI(14) at 32.2272 is on the verge of flashing oversold conditions with the Moving Average Convergence Divergence (MACD) crossover at 0.0001 and below the signal line pointing to a bearish sign for price action this week.
On the flip side, if dip-buyers and technical traders jump in and trigger a bullish turnaround, the initial resistance will be at the 0.63633 level. Sustained strength above the aforementioned ceiling would lift spot prices toward the key supply zone ranging from 0.63903 - 0.64233 levels. A convincing break above the aforementioned resistance level would set the stage for further near-term appreciating moves.
