Risk aversion and weaker Australian inflation direct bears to area below 0.6500 ahead of US GDP

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  • AUD/USD remains under pressure around intraday low, falls back to 2-year low.
  • Australia’s first-ever monthly CPI suggests inflationary pressure is easing.
  • Yields pare the biggest daily decline in six months as geopolitical tension remains intact.
  • China’s plans to issue government bonds are probing sellers, final Q2 US GDP readings eyed.

AUD/USD pares intraday losses around 0.6490, recently bouncing off daily lows as traders wait for fresh clues to defend the latest pullback moves.

That said, pessimistic impressions of Australia’s monthly Consumer Price Index (CPI) joined the risky mood to weigh on the Aussie pair early Thursday. The same joined firmer US Treasury yields to shore up the previous day’s rebound from the two-year low.

According to the first monthly CPI data from the Australian Bureau of Statistics (ABS), overall price pressure eased in August to 6.8% from 7.0% in July. The same joins recent cautious statements from the Reserve Bank of Australia (RBA) to challenge AUD/USD buyers after the data release.

Elsewhere, Wednesday’s risky mood and China’s efforts to propel domestic markets to overcome fears of a slowdown appear to be helping the recent rebound in US Treasury yields, as well as the US dollar. In the same vein, the People’s Bank of China (PBOC) may raise the fixed price of the onshore yuan for the first time in nine days and plans to issue 2.5 trillion yuan of government bonds in the fourth quarter. .

It should be noted, however, that market doubts about the ability of the Bank of England (BOE) to restore UK economic performance while maintaining the recently criticized fiscal plan are weighing on sentiment, as well as on AUD/USD prices. Moreover, hawkish commentary from global central bankers, including those in Europe and the United States, ties in with Europe’s looming energy crisis and Russia’s reluctance to heed Western pressure to exert further downward pressure. on the main currency pair.

Amid the play, 10-year US Treasury bond yields pared the biggest daily loss in six months and allowed the US dollar index (DXY) to rally back to the 20-year high hit the day before. It’s worth noting that S&P 500 futures are posting slight losses and fades are bouncing off a 21-month low lately.

Subsequently, the final second quarter US gross domestic product (GDP) readings, which are expected to confirm the -0.6% annualized figure, may entertain AUD/USD traders. However, the risk catalysts are more important and therefore the Fedspeak, as well as the headlines out of China, can clearly direct the pair’s movements in the short term.

Technical analysis

A sustained reversal of a two-week-old resistance line near 0.6530 at the latest redirects AUD/USD towards the 78.6% Fibonacci (FE) expansion of April-August moves of the AUD/USD pair, around 0.6355.

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