AUD/USD drops amid strong US Dollar, risk-off impulse ahead of Aussie’s CPI report

• AUD/USD trades at 0.6418, down 0.08%, with sellers targeting the 0.6400 figure and a potential break below a crucial two-and-a-half-year support trendline.
• The Greenback remains strong, touching a new YTD high of 106.20 on the US Dollar Index (DXY), fueled by elevated US Treasury bond yields and risk aversion in the market.
• Upcoming data releases, including Australia's Monthly Consumer Price Index (CPI) and several US economic indicators, are keenly awaited by traders for further market direction cues.

The Australian Dollar (AUD) prolonged its losses against the US Dollar (USD) early in the North American session after hitting a daily high of 0.6430. Sellers are eyeing the 0.6400 figure and a break below a two-and-a-half-year support trendline that could cement a weaker outlook for the major. The AUD/USD is trading at 0.6418, down 0.08%.

AUD/USD remains under pressure, eyeing the 0.6400 figure, as higher US Treasury bond yields and deteriorating consumer confidence in the US impact market sentiment

The AUD/USD remains pressured due to risk aversion, higher US Treasury bond yields, and the interest rate difference between Australia and the United States (US).  Although US Treasury bond yields retraced somewhat from multi-year highs, the Greenback (USD) remains in the front foot after touching a new year-to-date (YTD) high of 106.20, as revealed by the US Dollar Index (DXY).

On the data front, Building Permits in the US grew more than July’s 1.443M, and came at 1.541M in August, while home prices continued to rise due to higher mortgage rates in the US. Nevertheless, New Home Sales plunged -8.7%, compared to July's 8% increase, signaling the housing market is weakening amidst 525 basis points of tightening by the US Federal Reserve.

Further data showed that Consumer Confidence revealed by the Conference Board (CB) slid to a four-month low, blamed on a deterioration in the economic outlook for the economy. The CB Consumer Sentiment index rose by 103 from August 108.7, as data shows. Dana Peterson, the chief economist, commented that consumers are worried about rising prices in general, particularly food and gasoline, and expressed concerns about higher interest rates and the political situation.

What to watch?

Australia would feature its Monthly Consumer Price Index (CPI) for August, with inflation foreseen to jump from 4.9% to 5.2%. The US economic agenda would feature Fed speakers led by Bowman, Durable Goods Orders, GDP, Initial Jobless Claims, and the Fed’s preferred gauge for inflation, Core PCE.

AUD/USD Price Analysis: Technical outlook

The daily chart is neutral to downward biased, as the pair consolidated at around the year’s lows and is testing a multi-year support trendline. A breach of the latter could pave the way to test the year-to-date (YTD) low of 0.6357, followed by a drop to the November 22 swing low of 0.6272. Conversely, buyers must reclaim 0.6500 and the 50-day moving average (DMA) at 0.6506 to remain hopeful for higher prices.