AUD/USD retreats to 0.7500 area after failure at 0.7555

• The aussie retreats to 0.7500 after failure at 7545/50.
• The risk-sensitive AUD loses ground as market mood worsens.
• AUD/USD might extend losses if 0.7550 resistance caps.

The Australian dollar has been rejected again at the 0.7545/55 resistance area again, and the pair has given away Thursday’s gains, returning to the 0.7500 area. The aussie is heading lower on Friday, with the US dollar strengthening across the board.

The US dollar picks up as market sentiment sours

The AUD has been unable to maintain the bid tone shown during the previous four days and is pulling back against a firmer dollar. The USD is taking advantage of its safe-haven status amid a deteriorated market sentiment and firmer US Treasury yields.

Risk appetite was hammered on Thursday after the Commerce Department revealed that the US economy decelerated beyond expectations. These figures have curbed optimism about a strong post-pandemic recovery, which is taking a toll on equity markets and risk-sensitive currencies like the aussie.

On the macroeconomic calendar the US Personal Consumption expenditures, the Fed’s preferred inflation gauge surged 3.6% year-on-year in September, adding pressure to the central bank to accelerate its policy normalization plan. US T bond yields have ticked up on the back of these figures, thus increasing demand for the US dollar.

In Australia, retail sales bounced up strongly in September after having plunged over the previous three months as the easing COVID-19 restrictions have helped consumers to go to the shops.

AUD/USD: Headed lower if 0.7550 resistance caps – Citibank

The FX analysis team at Citibank, warns that failure to breach 0.7550 resistance could trigger a significant reversal: “The RBA decided not to defend its 3y yield target 0.1% which sent the April 2024 bond soaring. This has increased conviction that RBA may shift more hawkish in their forward guidance. However, as reflation bets move towards stagflation ones, the aussie struggles, particularly with the pullback in commodity prices that has kept it supported all month (…) Add to that the usual USD bid into month end, and risk/reward in AUD/USD appears more skewed to the downside, with 0.7550 providing firm resistance.”

Technical levels to watch