AUDUSD drops from weekly highs to 0.6730s on risk aversion

• Economic data from the United States was mixed and bolstered the US Dollar.
• US Retail Sales grew the most in eight months, while Industrial Production disappointed.
• Albeit Australia’s WPI jumped, it won’t deter the Reserve Bank of Australia from 25 bps hikes.

The AUDUSD retreats from weekly highs around 0.6800 after a sales report in the United States, showing consumers resilience despite higher interest rates. Also, a risk-off impulse spurred by geopolitical jitters capped the Australian Dollar (AUD) gains. At the time of writing, the AUDUSD is trading at 0.6741, beneath its opening price, after hitting a daily high of 0.6792.

US Retail Sales jumped, spurring a risk-off impulse

US equities remain negative, following the US Retail Sales report. The US Department of Commerce (DoC) informed that October’s Retail Sales grew by 1.3% MoM against 1% expectations by analysts. In the same report, the control group sales used to calculate the Gross Domestic Product (GDP) rose 0.7% MoM against a 0.3% increase.

Given that the last two inflation reports in the United States, the Consumer Price Index (CPI) and the Producer Price Index (PPI), were softer, consumers exerted additional pressure on the Federal Reserve (Fed). However, a slew of Federal Reserve officials crossing newswires commented that the central bank is resolute in tackling inflation but with gradual interest-rate increases.

Later, two Fed officials crossed wires. New York Fed President John Williams said that price stability is essential for the US economy to function well. Later, the San Francisco Fed President Mary Daly said the central bank wants to see the economy slow, so they can get inflation down. She added that “Pausing is not part of the discussion” and foresees the Federal Funds rate (FFR) to peak at around 4.75% - 5.25%.

Further US data revealed during the day saw Industrial Production (IP) plunging from September’s 0.1% to -0.1% MoM, below estimates of a 0.2% increase.

Australia’s WPI jumped thought won’t deter RBA’s from gradual hikes

Elsewhere, the Australian Wage Price Index (WPI)  rose by 3.1% in the Q3, higher than expected but consistent with what the Reserve Bank of Australia (RBA) thought was a necessary condition for achieving their 2-3% CPI inflation target, according to ING analysts.

Analysts at ING said: “Consequently, even with the last inflation and now wages data surprising on the upside, we don’t believe they will shift back to their previous 50bp pace of tightening and will continue at a 25bp pace at coming meetings, with the peak for cash rates likely to come in 1Q23 as the cash rate hits 3.6%.”

The AUDUSD retreated from weekly highs and trimmed its earlier gains, even though the inverted head-and-shoulders pattern remained in play. As long as the AUDUSD remains above the 0.6700 figure, a move to the inverted head-and-shoulders pattern target at 0.6870 is on the cards.

AUDUSD Price Analysis: Technical outlook

From a daily chart perspective, the AUDUSD remains neutral-to-upward biased. The inverted head-and-shoulders are still intact unless the major plunges below 0.6400. OF note, the 100-day Exponential Moving average (EMA) at around 0.6696 acted as support twice, meaning buyers stepped in at that level. The Relative Strength Index (RSI) in bullish territory reaffirms buyers are in charge, though its downward slope suggests the AUDUSD might consolidate in the 0.6700/0.6800 area.