AUD/USD plunges more than 150 pips amid US inflation exceeding estimates

• Traders were caught off guard by higher-than-foreseen August US inflation.
• A risk-off impulse weighed on US equities, alongside high-beta currencies, like the Australian dollar.
• AUD/USD Price Analysis: Traders are eyeing a re-test of September’s low at 0.6698.

The AUD/USD tanks more than 2% courtesy of renewed fears about inflation in the US, exceeding estimates, although decelerating compared with the previous month’s reading. Nevertheless, a risk-off impulse sent US equities tumbling between 3.52% and 5.00%, meaning that market players were expecting a lower reading.

As the New York session is about to end, the AUD/USD is trading at 0.6736, well below its opening price, after hitting a daily high at 0.6916.

The US Department of Labour reported that August inflation in the US came at 0.1% MoM, above -0.1% contraction foreseen by analysts, while annually based, ticked higher to 8.3%, against a consensus of  8.1%. Excluding volatile items like food and energy, the so-called Core Consumer Price Index (CPI) for the same period rose by 0.6% MoM, above 0.3% estimates, while the year-over-year reading increased by 6.3%, topping 5.9% forecasts.

Aside from this, the US Dollar Index, a gauge of the buck’s value against a basket of peers, rallied on expectations of a 100 bps rate hike in September, up 1.39%, at 109.816, underpinned by higher US Treasury yields, led by the benchmark note rate at 3.422%, rising six bps.

On the Australian dollar side, the Aussie economic docket featured the Business Consumer Confidence, data increasing 1 point to +20 in August, according to the National Australia Bank (NAB). The survey showed that prices eased in August to 4.4% from a record high of 5.3% in July, though it would likely not deter the Reserve Bank of Australia from hiking, even at a slower pace.

AUD/USD Price Analysis: Technical outlook

From a daily chart perspective, the AUD/USD is downward biased after failing to reclaim the 20 and 50-day EMAs at 0.6849 and 0.6891, respectively. AUD/USD traders should be aware that the Relative Strength Index (RSI), crossed below its 7-day SMA, flashing that sellers are gathering momentum. Therefore, in the near term, could be expected a re-test of the month’s low at 0.6698.