AUD/USD attempting to pick up from 0.7225 low

  • Aussie’s reversal from 0.7300 finds support at 0.7225. 
  • The US dollar bounces up, boosted by inflation fears.
  • AUD/USD seen retesting September’s low at 0.7170 – Credit Suisse.

Australian dollar’s pullback from the 0.7300 area has found support at an intra-week low of 0.7225.  The pair is attempting to pare losses on Wednesday’s US trading session and has returned to the mid-range of 0.7200.

Inflation concerns boost the US dollar’s recovery

The risk-sensitive AUD has lost momentum Wednesday, following a three-day rally which was capped again at the 0.7300/20 resistance area. The pair gave in against a firmer US dollar, favoured by safe-haven flows on concerns about the economic consequences of surging inflation.

World stocks are moving into negative territory with government bond yields rallying as the surging energy prices. With crude oil reaching seven-year highs, are increasingly wary that inflationary pressures could hamper the post-pandemic recovery and force the Federal Reserve to accelerate its monetary normalization process.

On the macroeconomic front, the US ADP report has anticipated a 568,000 increase on private payrolls in September, beating market expectations of a 428,000 increment. If these figures are confirmed by Friday’s labor report, the Fed might have another source of pressure to start rolling back its Quantitative Easing program.

AUD/USD likely to test September’s low at 0.7170 – Credit Suisse

From a Technical perspective, FX analysts at Credit Suisse observe the near-term AUD/USD trend biased lower, with a retest to 0.7170 low on the cards: “The crash in iron ore prices since July challenges the notion that AUD can strengthen because of its commodities exposure. Generalized strength in commodities is unlikely to be helpful for AUD (…) We lowered our AUD/USD target range from 0.7100-0.7450 to 0.7050- 0.7400 for Q4: the already constructive growth and policy outlook priced in ahead of key reopening dates makes us view AUD as asymmetrically exposed to the downside in the near-term.” 

Technical levels to watch

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