AUD/USD bears brace for fresh monthly low near 0.7300 amid firmer USD

AUD/USD remains depressed around 0.7300, having dropped the most in a week the previous day, as Asian markets kick-start for Wednesday.

The Aussie pair took multiple scars from domestic and overseas catalysts to welcome the bears on Tuesday. Notable among them were updates from the Reserve Bank of Australia (RBA), headlines concerning US President Joe Biden and his Chinese counterpart Xi Jinping’s virtual meeting and the US data that propelled hopes of Fed action, backed by comments from some present and former US Federal Reserve (Fed) policymakers.

Minutes of the latest RBA meeting reconfirmed the Aussie central bank’s outlook that the rate hike is off the table before 2024. RBA Governor Philip Lowe backed the same ideal while saying, “The latest data do not warrant a rate hike next year,” while adding that it is still plausible that the first increase will be not before 2024. These updates cooled down rate hike expectations that soared especially after the jump in the Australia Q3 inflation figures.

Elsewhere, Xi-Biden talks couldn’t amuse optimists as both sides had their differences and US President Biden recently signaled that they have a lot to follow up despite having a “good meeting” with China’s Xi.

Furthermore, the Fed rate hike expectations jumped following an eight-month high print of the US Retail Sales for October, 1.7% MoM versus 1.4% expected. Adding to the bullish bias were figures concerning the US Industrial Production and housing market data. It’s worth noting that Fed policymakers like St. Louis Fed President James Bullard joined ex- US Treasury Secretary and former New York Fed President, Lawrence Summers and Bill Dudley respectively, to back the need for the Fed’s action. However, San Francisco Federal Reserve Bank President Mary Daly recently said, “Rate hikes would not fix high inflation now, would curb demand and slow recovery.”

Amid these plays, the US Treasury yields rose 2.3 basis points (bps) to refresh a three-week high whereas the US Dollar Index (DXY) jumped to the new 16-month top. Further, equities were also positive but gold prices dropped after rising to a fresh peak since June.

Looking forward, AUD/USD traders will wait for the third quarter (Q3) Wage Price Index, expected 0.5% versus 0.4% prior, for a corrective pullback even as the RBA has ruled out rate hike concerns. Following that, Fedspeak and risk catalysts will be the key. Overall, a firmer US dollar and push for the Fed action can keep the pair bears hopeful.

Technical analysis

AUD/USD pair’s failures to cross a convergence of the 50-SMA on the four-hour chart and a two-week-old resistance line, around 0.7360 by the press time, directs the quote towards refreshing the monthly low of 0.7278.