AUD/USD flirts with monthly low under 0.7350, Aussie employment report eyed

• AUD/USD holds lower ground following the biggest daily loss in over a week.
• 30-year high CPI, US President Biden’s push to battle inflation pressure propel Fed rate hike concerns.
• USTR comments ahead of Sino-American virtual summit, Evergrande woes exert additional downside pressure.
• Australia jobs data may probe pair bears amid recent unlocks but RBA rate hike needs more push.

AUD/USD keeps the US inflation-led bearish bias even as the bears take a breather around monthly bottom close to 0.7320 amid early Thursday morning in Asia. In doing so, the Aussie pair justifies the market’s risk-off mood amid rate hike concerns and updates over the US-China trade relations, as well as Evergrande.

Having witnessed a multi-year high US inflation, President Joe Biden showed readiness to battle the price pressure, which in turn exerts additional downside pressure on the Fed to increase the benchmark rate.

Chatters over the US Federal Reserve’s (Fed) rate hike swirled after the headline Consumer Price Index (CPI) jumped to the highest levels in three decades, 6.2% YoY, pushing the AUD/USD prices lower. “The October CPI data implies that if US inflation miraculously falls back to 0.2% m/m from November and maintains that rate of increase for 12 months, CPI inflation will still average 3.2% y/y in Q3 next year – way above the Fed’s target,” the ANZ report recently said.

However, comments from Patrick Timothy Harker and Mary C Daly, respective Presidents of the Federal Reserve Bank of Philadelphia and San Fransisco, tried to defend the Fed doves. While Harker highlighted the possibilities of a rate hike even while tapering is on, Fed’s Daly said, per Reuters, that it would be premature to change the calculation on raising rates.

Further, the growing rift between the US and China ahead of next week’s virtual summit of US President Biden and his Chinese counterpart Xi Jinping also weighs on the AUD/USD prices. Recent comments from US Trade Representative (USTR) Katherine Tai weren’t signaling any optimism ahead of the key meeting.

Additionally, China’s struggling real-estate major Evergrande is said to have officially defaulted as the DMSA - Deutsche Marktscreening Agentur (German Market Screening Agency), is up for preparing for the firm’s bankruptcy filing, per the Daily Express.

Hence, multiple challenges to the market sentiment join the Fed rate hike concerns to weigh on the risk-barometer AUD/USD prices.

Amid these plays, Wall Street closed lower and the US 10-year Treasury yields jumped the most in seven weeks.

Moving on, the updates over China and Evergrande may entertain the AUD/USD traders ahead of the Aussie jobs report for October. Although the data is likely to allow bears to take a breather, the Reserve Bank of Australia (RBA) has already set high bars for the rate hike and hence the trend reversal of the Aussie pair isn’t on the table even if the figures arrive as too positive.

Read: Australian Employment Preview: A positive surprise or too much optimism?

Technical analysis

AUD/USD marked a daily closing below the 50-DMA, as well as the 100-DMA, around 0.7375-70 to keep sellers hopeful of visiting the 61.8% Fibonacci retracement (Fibo.) of September-October upside, around 0.7320. Alternatively, a monthly resistance line and the 38.2% Fibo. level, respectively around 0.7390 and 0.7410, gains the market’s attention during the recovery moves.