AUD/USD skids to near 0.7220, upside remain favored on weak DXY, US Inflation buzz

• AUD/USD is expected to rebound after a corrective move on positive market sentiment.
• The RBA elevated its OCR by 50 bps despite the downbeat job additions.
• The US core CPI is likely to slip to 5.9% from the former figure of 6.2%.

The AUD/USD pair has slipped to near 0.7224 after failing to cross 0.7240 on Tuesday. A minor correction after a sheer upside move is indicating that the aussie bulls’ party is not over yet as an unexpected extreme hawkish stance from the Reserve Bank of Australia (RBA) has strengthened the antipodean.

The RBA elevated its benchmark rates by 50 basis points (bps) in its monetary policy meeting on Tuesday. For cornering the soaring inflation, an announcement of a rate hike by 25 bps was expected from RBA Governor Philip Lowe. Also, the downbeat Employment Change reported by the Australian Bureau of Statistics last week indicated that the RBA would not paddle its Official Cash Rate (OCR) vigorously as it may dampen the employment opportunities further.

To be noted, the Australian economy has added 4k jobs in the labor force in May, significantly lower than the estimates of 30k. Therefore, an extreme hawkish stance carries the potential to scale down the employment opportunities firmly.

Meanwhile, the US dollar index (DXY) has opened flat and is expected to remain subdued ahead of the US inflation. The DXY displayed inability on Tuesday while extending its upside move above 102.84. This dragged the asset lower and a slippage below 102.26 will trigger the downside filters.

Going forward, investors’ focus will remain on the release of the US inflation, which is due on Friday. The annual US inflation is expected to remain unchanged at 8.3% while the core Consumer Price Index (CPI) could tumble to 5.9% from the prior print of 6.2%.