AUD/USD attempting to bottom at 0.6390 after a two-day reversal from 0.6500

• The aussie is attempting to bounce up from 0.6390 after a reversal from the 0.6520 high. 
• The cautious market mood has weighed on the AUD.
• AUD/USD could extend losses toward the 2020 low at 0.5506.

The Australian dollar is attempting to regain the 0.6400 area on Friday’s afternoon US session. The pair has found support at 0.6390 after having depreciated from the 0.6520 high on Thursday.

The aussie loses ground in a cautious market mood

The pair has given away most of the week’s gains over the last two days, with risk appetite fading and the investors adopting a more cautious stance, awaiting the outcome of the Federal Reserve’s monetary policy meeting due next week.

The Fed is widely expected to hike rates by 75 basis points for the fourth consecutive time, although the market is pricing in a lower rate hike in December, which has kept US dollar bulls subdued.

Friday’s US data has failed to provide a clear direction for the USD. The consumer spending figures have shown an unexpectedly high increase in September, showing that Americans continue going shopping despite the historical inflation levels.

On the other hand, private wage growth decelerated in the third quarter, which might be one of the first indicators suggesting a peak in inflation. Furthermore, Personal Consumption Expenditures remained flat at a 6.2% annual rate while the Core PCE, accelerated less than expected.

AUD/USD could revisit the 2020 low at 0.5506 – Credit Suisse

On the longer-term, FX analysts at Credit Suisse contemplate a sustained aussie depreciation: “With medium-term momentum staying bearish, we look for a fall to the 78.6% retracement of the 2020/21 uptrend and the low from April 2020 at 0.6041/5978 after the pause. Whilst we would not rule out another short pause here, a convincing break lower would raise a prospect for a move all the way to 0.5506 – the low of 2020.”

Technical levels to watch