- AUD/USD touches a fresh weekly low amid some follow-through buying around the USD.
- Expectations that the Fed may lift interest rates more than projected underpins the buck.
- Softer Australian GDP print and Chinese trade balance data contribute to the downfall.
The AUD/USD pair attracts fresh sellers near the 0.6715 region on Wednesday and drops to a fresh weekly low during the early part of the European session. The pair is currently finding support at the 100-day SMA at around 0.6680, but seems vulnerable to a break lower amid some follow-through US Dollar buying.
In fact, the USD Index, which measures the greenback's performance against a basket of currencies, is prolonging this week's recovery move from over a five-month low for the third straight day. The recent upbeat US macro data suggests that the economy remains resilient despite rising borrowing costs and this has fueled speculation that the Fed may lift rates more than projected. This, in turn, acts as a tailwind for the US Treasury bond yields and continues to lend support to the Greenback.
The Australian Dollar, on the other hand, is pressured by Wednesday's softer domestic GDP print, which showed that the economy expanded by 0.6% during the third quarter. This marks a notable slowdown from the 0.9% growth recorded in the previous quarter and also fell short of the 0.7% rise anticipated. Apart from this, a sharp drop in China's Trade Balance outlines deep cracks running in the world's second-largest economy and exerts additional pressure on the China-proxy Aussie.
The fundamental backdrop now seems tilted in favour of bearish traders and supports prospects for some meaningful downside for the AUD/USD pair. That said, firming expectations that the US central bank will slow the pace of its rate-hiking cycle might hold back the USD bulls from placing aggressive bets and help limit losses for the major. It is worth mentioning that the markets have been pricing in a greater chance of a relatively smaller 50 bps Fed rate hike in December.
This, in turn, warrants some caution before confirming that the AUD/USD pair has topped out in the near term amid absent relevant market-moving economic releases from the US. Traders might also prefer to wait on the sidelines ahead of next week's key data/event risks - the release of the latest US consumer inflation figures and the highly-anticipated FOMC monetary policy meeting on December 13-14.
Technical levels to watch
AUD/USD
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