AUD/USD tests key support around 0.7285 amid monetary policy divergence
11.11.2021, 09:07

AUD/USD tests key support around 0.7285 amid monetary policy divergence

  • AUD/USD challenges key support as the King dollar dominates.
  • Hot US CPI boosts Fed rate hike expectations, poor Aussie slashes RBA’s.
  • RSI remains heavily bearish; more losses remain in the offing.

AUD/USD is bouncing back towards 0.7300, having found strong demand around the 0.7285 region. The spot hit fresh weekly lows at 0.7287 in the last hour, as the buying interest around the US dollar remains unabated after a big jump in the country’s Consumer Price Index (CPI).

The US inflation jumped to the level not seen since 1990 on Wednesday and ramped up the Fed’s rate hike expectations. Meanwhile, the Australian employment data disappointed markets, watering down the Reserve Bank of Australia’s (RBA) rate hike calls.

The divergent monetary policy outlooks between the Fed and the RBA will continue to weigh down on the aussie.

Markets also keep a close eye on the Chinese property sector news and the price action in the commodities space for fresh trading incentives on the pair, as the US celebrates Veterans Day.

Looking at AUD/USD’s daily chart, the pair challenged the bullish commitments at the critical demand zone around 0.7290-0.7285, which is the confluence of the October 11 and October 8 lows.

Note that the downside opened up for the major after it convincingly breached the critical 50-Daily Moving Average (DMA) at 0.7369 a day before.

The 14-Day Relative Strength Index (RSI) has eased off lows but remains well below the midline, backing the latest rebound in the spot.

Although the downside risks persist on selling resurgence, with the abovementioned key support to give way for a fresh downswing towards the horizontal trendline support at 0.7250.

AUD/USD: Daily chart

On the flip side, the aussie will need to recapture the daily highs of 0.7342 to initiate any meaningful recovery towards the 50-DMA support-turned-resistance. At that level, the 100-DMA emerges, making it a powerful upside barrier.

The aussie will next target a move above 0.7400, which will negate the near-term bearish momentum.

AUD/USD: Additional levels to consider

 

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