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Market News AUD/USD attracts bids below 0.6350; the downside is preferred ahead of US CPI

AUD/USD attracts bids below 0.6350; the downside is preferred ahead of US CPI

AUD/USD has detected buying pressure below 0.6350, but a decline is inevitable. The optimistic US NFP has increased the likelihood of a 75 basis point rate hike by the Fed. As a result of lower fuel costs, the headline U.S. CPI may fall to 8.1%.

Daniel Rogers
2022-10-10
611

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After falling below immediate support around 0.6350 during the Asian session, the AUD/USD pair has rallied. The outlook for the asset does not appear bullish as market sentiment remains negative. Positive US Nonfarm Payrolls (NFP) statistics released on Friday extended the US dollar index's (DXY) recovery and put the S&P 500 into a trance.

 

In Tokyo, the DXY has surpassed the previous week's high at 112.88 and is poised to add to its gains as hawkish Federal Reserve (Fed) policy wagers surge. The US NFP was reported on Friday at 263k, exceeding predictions of 250k. This has increased the likelihood of a fourth straight 75 basis point (bps) increase in interest rates. Stronger economic fundamentals and a robust labor market are always necessary for the central bank to confidently announce rate hikes.

 

Increasing prospects of a 75 basis point rate hike have boosted rates. The 10-year US Treasury yields surpassed 3.9% and posted four consecutive days of gains.

 

Thursday's release of US Consumer Price Index (CPI) data will be the next focus for investors. According to preliminary forecasts, headline inflation will decline to 8.1% from 8.5% previously. While the core CPI, which excludes food and energy costs, will increase from 6.3% to 6.5%. It appears that the Federal Reserve's decision to raise interest rates is having little effect; but, the decline in gasoline prices has begun to affect the headline inflation rate.

 

The aussie bulls are expecting the publication of Consumer Inflation Expectations data later this week. The economic statistics is anticipated to be 5.8%, up from 5.4% in the previous report. This may push the Reserve Bank of Australia to take action (RBA). Governor Philip Lowe of the Reserve Bank of Australia (RBA) increased the Official Cash Rate (OCR) by 25 basis points to 2.6% and intends to increase it to the targeted level of 3.0%.


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