AUD/USD aims to extend recovery above 0.6530 as DXY plunges, US GDP eyed

The AUD/USD pair is witnessing a mark-up inventory accumulation phase after displaying a juggernaut rally to near 0.6530. The asset is expected to extend its recovery and will march towards the critical hurdle of 0.6600. Earlier, the commodity-linked currency rebounded firmly after dropping to near 0.6360. The major advanced vertically as investors shrugged off pessimism and poured funds into the risk-sensitive currencies.

The US dollar index (DXY) plummeted like there is no tomorrow after failing to sustain above the critical hurdle of 114.50. A failure in hitting the round-level resistance of 115.00 dragged the DXY sharply to near 112.71. This indicates that risk sentiment has turned positive for a while as a ‘value bet’ context doe risk-perceived assets kicked in.

Comments from Federal Reserve (Fed) policymakers are advocating a continuation of the current pace of hiking interest rates. Atlanta Fed President Raphael Bostic started to cross wires on Wednesday stating that the baseline scenario right now includes a 75 basis points (bps) rate hike in November followed by a 50 bps increase in December, as reported by Reuters. He further cited that the inflation thing is too high and has not responded well to the policy tightening measures.

Going forward, the US Gross Domestic Product (GDP) data will be keenly watched. The annualized data for the second quarter is expected to decline by 0.6%, similar to the prior reading.

On the Australian front, aussie dollar has benefitted from better-than-projected monthly Retail Sales data. The economic data landed at 0.6%, higher than the estimates of 0.4%, but lower than the prior release of 1.3%. As the Reserve Bank of Australia (RBA) is tightening its policy heavily to combat the galloping inflation, higher-than-expected Retail Sales data has delighted the central bank.