AUD/USD bears eye 0.6700 amid inflation woes, Aussie Employment, RBA’s Lowe eyed

• AUD/USD holds lower ground at weekly bottom after falling the most since March 2020.
• Strong US inflation data renewed fears of Fed’s aggression, yields revived recession woes.
• China’s return, readiness for more stimulus failed to infuse any optimism.
• Second-tier data may entertain traders but bears are likely to keep reins.

AUD/USD bears are in full steam as the US inflation release renewed fears of the Fed’s aggression. Also acting as the risk-negative catalyst, as well as weighing on the Aussie pair prices, are the tensions surrounding the US-China ties. With this, the quote holds lower ground near 0.6730 after declining the most in 2.5 years the previous day.

US Consumer Price Index (CPI) for August rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior regains. The monthly figures, however, increased to 0.1%, more than -0.1% expected and 0.0% previous readings. The core CPI, means CPI ex Food & Energy, also crossed 6.1% consensus and 5.9% prior to print 6.3% for the said month.

Following the US inflation data release, the bets on the Fed’s next move turned increasingly hawkish, with the 75 basis points (bps) of a hike appearing almost certain next week. It’s worth noting that there is around 25% chance that the US Federal Reserve (Fed) will announce a full 1.0% increase in the benchmark Fed rate on September 21 meeting.

It should be noted that the yield inversion also widened after US inflation data and propelled the recession woes, which in turn drowned the AUD/USD prices due to the pair’s risk-barometer status. That said, the US 10-year Treasury yields rallied to 3.412% and those for 2-year bonds increased to 3.76% following the data, around 3.41% and 3.745% respectively at the latest.

Other than the inflation and recession woes, the geopolitical fears emanating from China and Russia also weighed on the AUD/USD prices. Headlines from the Financial Times (FT) suggest mixed views over US President Joe Biden’s chip plan that challenges China to seem to weigh on the AUD/USD buyers. On the same line, Chinese President Xi Jinping’s aim to reassert Beijing’s influence during the first foreign trip after covid-led lockdowns underpins the cautious mood as it could escalate the US-China tension.

Alternatively, Bloomberg reported that China’s Premier Li Keqiang vowed more policy support to drive up consumption in the economy. The news also signaled that China will adhere to multiple measures to stabilize growth, employment and prices. However, the same failed to impress AUD/USD prices.

Amid the risk-off mood, Wall Street benchmarks and the prices of gold slumped, which in turn exerted additional downside pressure on the gold.

Moving on, a light calendar ahead of the US Producer Price Index (PPI) may keep AUD/USD on the dicey floor but the bears are likely to keep control before Thursday’s Australia jobs report and Friday’s speech from the Reserve Bank of Australia (RBA) Governor Philip Lowe.

Technical analysis

A clear reversal from the 50-DMA, around 0.6890 by the press time, directs AUD/USD bears towards the yearly low of 0.6680.