- Vulnerable below a break of 0.7630 – key pivot level.
- Sell-off in commodities, higher DXY accentuated the selling bias.
The AUD/USD pair failed yet another recovery attempt near the 0.7680 region and from there got hammered to test the weakest levels in four-months at 0.7634 amid relentless demand for the US dollar across its main competitors.
The US dollar index sits at the highest levels in eight weeks at 90.46, tracking the upsurge in Treasury yields, especially 10-year yields, which remains a whisker short of the 3 percent bulwark.
Additionally, a fresh sell-off seen across the commodities’ board amidst stronger US dollar collaborated to the declines in the resource-linked currency, the AUD while increased nervousness ahead of the Australian CPI report also prompted repositioning trades in the spot.
Markets are expected a 0.5% q/q increase for the Australian 'trimmed mean' and 'weighted median’, which would still leave the annual inflation rate well below the Reserve Bank of Australia’s (RBA) 2-3% target range.
Markets await the US flash manufacturing PMI and existing home sales data for fresh dollar trades, with dismal releases likely to offer some respite to the bulls.
AUD/USD levels to watch
According to Slobodan Drvenica at Windsor Brokers, “bearish setup of daily techs and stronger US dollar, keep the Aussie under strong pressure, with firm breakthrough pivotal 0.7650/26 zone expected to spark fresh extension of bear-leg from 0.8135 (2018 high) for test of 0.7500 (09 Dec) trough. Oversold daily slow stochastic suggests that bears may show stronger hesitation at key 0.7650/26 support zone, awaiting the release of Australian inflation data (due early Tue) for fresh signals. Descending 20SMA (0.7710) is expected to cap extended upticks.”
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