AUD/USD regains lost ground an returns to levels near 0.6300

• The aussie bounces up from six-month lows at 0.6170 and returns to 0.6300.
• The US dollar losses ground as the effect of US CPI data ebbs.
• AUD/USD might depreciate below 0.6000 – ING.

The Australian dollar is going through a sharp recovery during Thursday’s US session erasing loses from earlier on the day. The pair has bounced from six-month lows at 0,6170, returning to levels right below 0.6300 and turning positive on the day.

The US dollar retreats from highs

The Aussie pares losses with the US dollar losing ground as the effect of the US inflation report start to settle. Investors might be coming to terms with the idea that a 100 BP rate hike in November is rather unlikely, especially after the moderately dovish tone of September’s FOMC minutes.

According to the US CPI data, prices accelerated at a 0.4% pace in September, well beyond expectations of a 0.2% increase, with the year inflation surging 8.2% higher. These figures triggered hopes that the Federal Reserve could increase borrowing costs at a more aggressive pace in November.

Federal Fund Futures have priced in a 13% chance of a 100 basis points rate hike immediately after the data release and the US dollar surged across the board. The US Dollar Index (DXY) appreciated to a fresh-24-year high at 114.70 to pull down to the 112.00 area at the moment of writing.

AUD/USD might extend losses below 0.6000 – ING

On a longer-term perspective, currency analysts at ING, observe see the Aussie likely to extend its decline to levels below 0.6000: “We remain bearish on AUD/USD into year-end, as risk sentiment fragility, China’s economic (and currency) woes and a strong USD (…). A break below 0.60 this year is entirely possible.”

Technical levels to watch