FX
  • AUD/USD turned lower for the third straight day in reaction to stronger US inflation figures.
  • The latest US CPI report reaffirmed hawkish Fed expectations and boosted the greenback.
  • The risk-off impulse further underpinned the buck and weighed on the risk-sensitive aussie.

The AUD/USD pair witnessed aggressive selling during the early North American session and turned lower for the third successive day in reaction to stronger US consumer inflation figures. The pair was last seen trading around the 0.7080-0.7075 region, or over a two-week low, down 0.25% for the day.

According to the data released this Friday, the headline US CPI rose to 1.0% MoM in May as against 0.7% expected and the yearly rate unexpectedly jumped to a fresh 40-year high level of 8.6%. Adding to this, core inflation, which excludes food and energy prices, came in at 0.6% MoM and 6.0% YoY rate versus consensus estimates for a reading of 0.5% and 5.9%, respectively.

The data reaffirmed market bets that the Fed would need to tighten its monetary policy at a faster pace to curb soaring inflation. This was reinforced by a fresh leg up in the US Treasury bond yields, which, along with a steep fall in the equity markets, pushed the safe-haven US dollar to a fresh three-week high and exerted heavy downward pressure on the AUD/USD pair.

Given the overnight break below the 0.7150 horizontal support, the emergence of fresh selling on Friday favours bearish traders and supports prospects for further losses. Hence, some follow-through weakness, towards testing the 0.7000 psychological mark, now looks like a distinct possibility. The downward trajectory could further get extended towards the 0.6945 support zone.

Technical levels to watch

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