AUD/USD drops sharply from 0.6500 as risk-on profile fades, Michigan CSI eyed

• AUD/USD has been dragged to near 0.6460 after facing barricades around 0.6500.
• A decent recovery in the DXY after robust GDP data has weighed on risk-perceived assets.
• The US Treasury yields have dropped sharply as bets for a 75 bps rate hike by the Fed have trimmed.

The AUD/USD pair has witnessed a steep fall after failing to cross the psychological hurdle of 0.6500 in the late New York session. The asset has attempted to cross the 0.6500 resistance multiple times and a spree of failures strengthened the resistance level.

A rebound in the risk-off profile also weighed pressure on the aussie bulls. A significant drop in S&P500 triggered the risk-aversion theme. The 500-stock basket witnessed losses as tech stocks drop sharply after Meta Platform Inc. (META) witnessed a bloodbath and fell to five-year lows.

Meanwhile, the US dollar index (DXY) resurfaced firmly after building a cushion around 109.53 on robust Gross Domestic Product (GDP) numbers. The DXY advanced to near 110.57 and recovered the majority of Wednesday’s losses. The US Bureau of Economic Analysis showed that the US economy has grown at a rate of 2.6% from July to September despite accelerating interest rates by the Federal Reserve (Fed). While the demand for durable goods landed lower at 0.4% than projections of 0.6% but remained higher than the former drop of 0.2%.

The 10-year US Treasury yields dropped sharply to 3.93% after a significant drop in Personal Consumption Expenditure (PCE) Prices for the third quarter. The economic data dived to 4.2% against the projections of 7.9%. As per the CME FedWatch tool, the chances of 75 basis points (bps) rate hike by the Federal Reserve (Fed) have dropped to 87.4%, which has weighed pressure on the returns from US Government bonds.

Going forward, the release of the Michigan Consumer Sentiment Index (CSI) data will remain in focus. The sentiment data is seen stable at 59.8.

On the Australian front, investors are awaiting the announcement of the interest rate decision by the Reserve Bank of Australia (RBA), which is due on Tuesday.