- AUD/USD has plummeted to its lowest point since August 8, driven by renewed buying interest in the US dollar.
- Expectations for smaller Federal Reserve rate cuts and persistently high US bond yields are lending support to the greenback.
- Traders are now eyeing upcoming US macroeconomic data as they prepare for the Australian CPI report set to be released on Wednesday.
The AUD/USD pair continues to face selling pressure for the third consecutive day on Tuesday, dropping to its lowest level since August 8, hovering around the mid-0.6500s during the early European session. This downward movement is driven by a surge in US Dollar (USD) buying, bolstered by expectations of a less aggressive approach to policy easing by the Federal Reserve (Fed).
Recent US macroeconomic data indicate that the economy remains robust, heightening market expectations for smaller interest rate cuts throughout the year. Additionally, concerns surrounding spending plans from Vice President Kamala Harris and Republican nominee Donald Trump are likely to exacerbate the deficit, which supports elevated US Treasury bond yields. This, in turn, helps the USD Index (DXY)—which tracks the dollar against a basket of currencies—halt its retracement from a three-month peak reached on Monday, further dragging down the AUD/USD pair.
Meanwhile, expectations for Australia's consumer inflation report—set for release on Wednesday—suggest an annual rate of 2.9% for the September quarter, marking the lowest rate since March 2021. This fuels speculation about a potential interest rate cut by the Reserve Bank of Australia (RBA), adding to the bearish sentiment surrounding the Australian Dollar (AUD) and contributing to the downward pressure on the AUD/USD pair. The recent decline could also be attributed to technical selling following last week's breakdown below the 200-day Simple Moving Average (SMA) support near the 0.6630-0.6625 region.
However, the AUD finds some support from reports that China plans to approve the issuance of over ¥10 trillion in extra debt in the coming years to stimulate economic conditions, potentially as early as next week. Traders are now focused on Tuesday's US economic data, which includes the Conference Board's Consumer Confidence Index and the Job Openings and Labor Turnover Survey (JOLTS). Additionally, US bond yields and broader risk sentiment will influence the USD, which could provide momentum for the AUD/USD pair ahead of the Australian Consumer Price Index (CPI) report on Wednesday.
