AUD/USD awaits key CPI, but will it be enough to shake of the bears below 4hr pivot point on 0.78
- US dollar makes fresh highs towards 94 handle in US session
- US 10-year yields breach 2.4%
- AU/US spreads favour downside
- US data strong
- Aussie CPI in focus, but to arrive below RBA's action point
AUD/USD is steady in the NY session where politics and Fed chair chat has taken a back seat for the time being.
The Aussie lost some ground in a long squeeze from at highs 0.7824, stops kicking in just below the handle and a sell-off down to 0.7770 lows. Currently, at the time of writing, AUD/USD is trading at 0.7779, down -0.34% on the day.
US Dollar treading water around 94.00
Instead of just politics today, US data was a positive for the greenback, with Markit Manufacturing PMI (Oct) 54.5 beating the expected 53.5 vs prior 53.1. Markit Services PMI (Oct) was coming in at 55.9, also beating expectations of 55.6 and above prior 55.3. However, without any further scheduled event catalysts in the US shift from here, eyes will remain in US yields and the AU/US spreads are in favour of further downside while the US ten year's yield has breached and held above the psychological 2.4% level so far. However, copper remains supportive, +0.31% so far at the time of writing and iron ore also had a positive run.
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Aussie CPI up next, but how much attention with the RBA pay to it?
With the monthly trimmed mean results from Jul-Sep averaged at 2.4%/yr, CPI today is expected to fall in at 2.0% y/y (Q3). But, underlying inflation reaching 2%, after 18 months below the RBA’s 2-3% target band, is already consistent with the RBA’s August projections.
"We suspect that the RBA wants to see inflation actually printing closer to mid-target before switching to a more hawkish tone, i.e. February 2018 at the earliest," argued analysts at TD Securities: "If underlying inflation merely edges up to 2%/yr, we don’t expect the report to have a material impact on RBA thinking. However, an upside surprise towards say 2.2%/yr, combined with much stronger employment over this year, can potentially provide a significant tailwind for the AUD, back towards $US0.788, and bring forward the first hike in the OIS strip, currently not priced for +25bp until October 2018," the analysts explained further.
AUD/USD levels
Technicals still lean bearish still while below the daily cloud (0.7850) and the 100-D SMA around 0.7825. According to the FXStreet Technical Confluences Indicator, just below the 100-D SMA is a strong pivot point on the 4-hr sticks where and a high level of congestion of technical indicators.
Nearer term, readings are also turning negative on the 4-hr sticks with a bearish target on the wide comes below the 0.7700 level with 0.7679 ahead of 0.7631 as the 50-W SMA and the 0.7444 2016-2017 uptrends. A break above 0.7900 opens 0.7930 as the 50% retracement level.