AUD/USD hits fresh three-week highs above 0.6500 as the USD dives
26.10.2022, 15:47

AUD/USD hits fresh three-week highs above 0.6500 as the USD dives

  • The Aussie bounces up at 0.6450 and returns above 0.6500.
  • The US dollar dives on hopes of a Fed pivot.
  • Australian CPI accelerates to a 32-year high.

The Australian dollar remains strongly bid for the second consecutive day on Wednesday. The pair has resumed the upside trend, after testing support at 0.6450 earlier today, and exploring levels past 0.6500 for the first time since early October.

Hopes of a Fed pivot are hurting the US dollar

The greenback remains on the defensive amid the increasing evidence that the Federal Reserve’s tightening cycle might damage economic growth before inflation is tamed.

Tuesday’s macroeconomic data showed that US housing prices slowed down for the second consecutive month in August, with rising mortgage prices pushing buyers out of the market.

The Fed is widely expected to approve the fourth consecutive 0.75% hike after the November 1 and 2 meeting, but the market is starting to price in a 0,50% hike in December. A report by the Wall Street Journal confirmed this scenario last week, suggesting that Fed officials are discussing how to communicate lower rate hikes for the months ahead. This is taking a toll on the US dollar, which has surged across the board over the last months, propelled by a hawkish Fed.

On the other hand, Australian data showed earlier on Wednesday that the CPI expanded at its fastest pace in 32 years in the third quarter. The yearly inflation accelerated by 7.3% against the 7% anticipated by the analysts, which adds pressure on the RBA to keep increasing interest rates thus buoying demand for the aussie.

Technical levels to watch

 

 

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