AUDUSD stumbles below 0.6700 on risk-off impulse, broad US Dollar strength

• Fed speakers hawkish commentary shifted sentiment sour and bolstered the US Dollar.
• Risk aversion weighed on risk-perceived currencies in the FX space, like the Australian Dollar.
• US housing data disappoints, contrary to unemployment claims, which dropped below estimates, suggesting the tight labor market.
• AUDUSD Price Analysis: Remains neutral-to-upward biased, but the pullback could extend towards 0.6500 before resuming the uptrend.

The Australian Dollar (AUD) plunged against the US Dollar (USD), blamed on Federal Reserve (Fed) policymakers’ hawkish commentary, which turned traders’ sentiment sour, as shown by US equities falling. The AUDUSD is trading at 0.6688, below its opening price by almost 1%, after hitting a daily high of 0.6751.

Federal Reserve’s hawkish commentary boosted the US Dollar

On Thursday, the St. Louis Fed President James Bullard commented that monetary policy is not “sufficiently restrictive,” adding that rates need to rise higher, within the 5% to 7% area, which spooked investors. Of late, the Cleveland Fed President Loretta Mester echoed his comments, saying that inflation is too high.

Meanwhile, a tranche of mixed economic data from the United States (US) was revealed on Thursday. Housing Starts for October shrank more than September’s 1.3% contraction, and Building Permits plummeted 2.4% MoM in October, against a 1.4% expansion in September

Regarding the labor market, US Initial Jobless Claims for the week ended on November 12 fell by 222K, below the 225K expected and lower than the previous week’s 226K. Contrarily Continuing Claims rose 13K, to 1.51 million, in the week ended on November 5, increasing for the fifth straight week, an uptrend signing that Americans are out of work for longer.

Elsewhere, the US Dollar Index, a gauge of the buck’s value against a basket of six currencies, remains above its opening price by 0.58%, at 106.902 underpinned by high US Treasury yields, with the US 10-year note rate raising nine bps, at 3.781%, after hitting a weekly low of 3.671%.

Australia’s employment data warrants further RBA action

Earlier in the Asian session, Australia’s employment figures beat estimations. The Employment Change indicator rose by 32.2K, above estimates of 15K, while the unemployment rate fell to 3.4%, below forecasts of 3.5%. According to TD Securities analysts: “The stronger-than-expected jobs report should also dampen hopes for any imminent pause from the Reserve Bank of Australia (RBA) after RBA Deputy Governor’s Bullock commented that the peak of the inflation cycle is near. As such, we continue to look for the Bank to proceed with 25bps hikes till Q1 next year.”

AUDUSD Price Analysis: Technical outlook

Given the backdrop, the AUDUSD plunged below 0.6700, extending its losses beyond the 100-day Exponential Moving Average (EMA) at 0.6694. although the inverted head-and-shoulders pattern is intact, the Relative Strength Index (RSI) peaking around 66, and with its slope aiming lower, suggests buying pressure is fading. If sellers clear the neckline at around the confluence of the 50-day EMA at 0.6495, it would invalidate the pattern; otherwise, the chart pattern remains in play.

AUDUSD key support levels lie at the weekly low at 0.6633, followed by the 0.6600 psychological figure, ahead of the 0.6500 mark. On the flip side, the AUDUSD’s first resistance would be the 100-day EMA at 0.6694, followed by the weekly high at 0.6797, ahead of the 0.6800 figure.