AUDUSD struggles to defend 0.6400, Australia Consumer Inflation Expectations, US CPI eyed

• AUDUSD holds lower ground after the biggest daily loss in a month.
• China’s covid woes, softer inflation data joined pre-US inflation anxiety to weigh on prices.
• Dovish comments from RBA’s Bullock strengthened bearish bias.
• Aussie Consumer Inflation Expectations can offer immediate directions but US CPI is the key.

AUDUSD bears pressure the quote to revisit 0.6400, despite the latest inaction around 0.6420, amid lackluster markets. In doing so, the Aussie pair extends the previous day’s losses, the biggest in one month, during the early hours of the key Thursday.

The China-linked risk aversion could be considered the key catalyst for the AUDUSD pair’s downside move the previous day. Fears from the dragon nation escalated after six-month high daily covid numbers and a fresh lockdown in one more district. Furthermore, downbeat China inflation data also weighed on the pair. That said, the headline Consumer Price Index (CPI) dropped to 2.1% versus 2.4% market forecasts and 2.8% prior. However, the Producer Price Index (PPI) improved to -1.3% compared to -1.5% expected and 0.9% previous readings.

Elsewhere, dovish comments from the Reserve Bank of Australia’s (RBA) Deputy Governor Michele Bullock also contributed to the AUDUSD pair’s weakness. There are “good reasons to think we are approaching the peak of inflation this cycle,” said RBA’s Bullock on Wednesday. The policymaker added, “We have already raised rates aggressively.”

It should be noted that the fears of a government gridlock in the US, due to the midterm elections, also exerted downside pressure on the risk-barometer pair.

On the other hand, New York Federal Reserve (Fed) President John Williams made some comments on inflation expectations in the text of a speech to be delivered to an audience in Zurich. “Relatively stable long-term inflation expectations are good news,” stated the policymaker.

Additionally, mixed headlines surrounding Russia also tried to tame the risk-off mood but failed to gain major attention. Russia appears to retreat from the only Ukrainian regional capital captured, namely Kherson, whereas President Vladimir Putin is less likely to attend the upcoming G-20 summit in Bali, starting from November 15.

Amid these plays, equities returned to the red after a three-day absence while the US Treasury yields also remained depressed. Even so, the US Dollar Index (DXY) bounced off a six-week low to print the first daily gain in three.

Moving on, Australia’s Consumer Inflation Expectations for November, expected 5.7% versus 5.4% prior, will precede the US Consumer Price Index (CPI) for October, expected 8.0% versus 8.2% prior, to direct immediate AUDUSD moves.

Given the recently dovish RBA comments and the risk-off mood, the AUDUSD is likely to stay on the bear’s radar unless the US inflation numbers disappoint the traders by a larger miss.

Technical analysis

A clear pullback from the 50-DMA, around 0.6500 by the press time, directs AUDUSD towards the 21-DMA nearby support, close to 0.6370 at the latest.