AUD/USD bulls have stepped into the bear's lair
- AUD/USD bulls move in, but bears are lurking.
- Aussie CPI is on the radar for the week ahead.
AUD/USD rallied hard on Friday hitting a high of 0.6392 ending the day 1.59% in the green. The price has broken the technical structure but as investors fret about inflation and the economic effects of central bank's efforts to rein it in, there could be headwinds that put the downside back into focus. Meanwhile, Aussie data will be eyed this week with the Consumer POrice Index on the radar.
''We expect a more dovish headline CPI print due to the significant offset from the rebates and lower pump prices,'' analysts at TD Securities said. ''However, trimmed-mean CPI may stay elevated at 1.6% q/q as broader price pressures are still brewing, especially in the housing and food categories. Unless trimmed-mean inflation is strongly higher, we expect the Bank to stick with 25bps hikes until March 2023.''
US Treasury yields hit the pause button on Friday following suspected Bank of Japan intervention and signals that the Federal Reserve might consider less aggressive inflation-curbing tactics after November. This led to all three major US stocks to surge but more than 2%, notching their biggest Friday-to-Friday percentage gains since June, closing the book on a week marked by mixed earnings, soft economic data and political turmoil in Britain.
The two-year yield slumped 12.7 basis points to 4.48% and the 10-year rate slipped less than a basis point to 4.22% after the WSJ published the fact that certain Federal Reserve officials are becoming uncomfortable with the speed of interest-rate hikes. The Fed has raised its target funds rate by 300 basis points since the policy tightening began this year. The probability of the Fed lifting rates in November by 75 basis points is 96.5%, according to the CME FedWatch Tool.
AUD/USD technical analysis
The price could be in for a correction but the focus is now on the daily resistance structure around 0.6450 so long as 0.6400 holds.