AUD/USD inches back closer to multi-week tops ahead of US CPI/FOMC minutes

  • A modest USD pullback assisted AUD/USD to attract some dip-buying on Wednesday.
  • Traders now eye the US CPI report and FOMC minutes for a fresh directional impetus.
  • A sustained move beyond multi-week tops is needed to confirm a fresh bullish break.

The intraday USD selling picked up pace in the last hour and pushed the AUD/USD pair to fresh daily tops, around the 0.7360 region.

The US dollar witnessed some profit-taking from one-year tops amid the ongoing retracement slide in the US Treasury bond yields. This, in turn, assisted the AUD/USD pair to attract some dip-buying near the 0.7330 region on Wednesday and inch back closer to four-week tops touched in the previous day.

The US bond yields have been rallying since late September when the Fed signalled that it would begin tapering its bond purchases by the end of 2021. Adding to this, the markets have been speculating an interest rate hike in 2022 amid worries over a faster than expected rise in inflation.

However, some repositioning trade ahead of Wednesday’s release of the US consumer inflation figures led to a modest pullback in the US bond yields. This, along with the FOMC minutes, will be looked upon to gauge the Fed’s view on normalizing monetary policy and influence the USD in the near term.

In the meantime, a generally positive risk tone was seen as another factor that extended some support to the perceived riskier aussie. That said, a combination of factors might hold investors from placing aggressive bullish bets around the AUD/USD pair and keep a lid on any meaningful positive move.

Worries that a widespread rally in commodity prices will stoke inflation and signs of a global economic slowdown have been fueling concerns about the return of stagflation. Apart from this, uncertainty over a spillover from China Evergrand’s debt crisis should cap any optimistic move in the markets.

Hence, it will be prudent to wait for some follow-through buying beyond the overnight swing highs, around the 0.7370-75 region, before placing fresh bullish bets. The AUD/USD pair might then aim to reclaim the 0.7400 mark and accelerate the momentum towards the 0.7415-20 static resistance zone.

Technical levels to watch

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