Inflationary pressures had abated in October in the US, as the headline Consumer Price Index (CPI) had eased to +7.7% y/y and the lowest level since February, while the core reading had moderated to +6.3% y/y from +6.6% previously.
Today markets turn to the latest CPI report (13:30 GMT), amidst some concern as to whether this softer inflation figures can be sustained, after last week's data which showed that the Core Producer Price Index increased in November on a monthly basis.
These figures will also be closely watched by Fed officials, ahead of Wednesday policy decision. The US central has signaled a moderation in the pace of tightening, following a series of jumbo 75 basis points rate hikes. However, it has also pointed to a higher terminal rate and the need for policy to remain restrictive.
The Reserve Bank of Australia has already stepped back, with smaller 0.25% rate increases in the last three meetings, despite the fact that inflation has not yet peaked.
These events can spur volatility and determine the path of AUD/USD, which comes from its best month of the year. On the other hand, the pair has shown inability to extend its advance past key technical levels, facing difficulties in December.
The Aussie has failed multiple time to stay above the 38.2% Fibonacci of the 2022 high/low drop, keeping it exposed to the EMA220 (0.6685-60). Further decline though, that would challenge the ascending trend line from October's 2+ year lows, would need strong catalyst.
AUD/USD is supported today and bulls are in the driver's seat above the EMA200. As such the can push for fresh highs towards 0.6917, but will likely need help from the incoming data for moving past it.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.