The AUD/USD pair faces downward pressure as hawkish Fed expectations and disappointing Chinese trade figures weigh on the Aussie, with the pair currently trading at 0.6905 ahead of key US inflation data.
AUD/USD is down 0.31% to around 0.6905 as markets raise the odds of a 25-basis-point Fed rate hike in December to about 99% from 84%, boosting the US Dollar. China's October trade surplus narrowed to $105.28 billion from $133.53 billion, missing the $125.8 billion consensus and weighing on the Australian Dollar. Today's US CPI (0.3% MoM headline expected) is the key swing factor that could extend or reverse the move.
Markets assign an approximately 99% probability to a 25-basis-point Fed rate hike in December, up from 84% a day earlier, and Governor Waller said rates need to rise to put downward pressure on inflation. This hawkish repricing supports the US Dollar. A stronger-than-expected CPI today could extend the Dollar's gains.
The Australian Dollar trades lower at 0.6905, down 0.31% as markets price in a 99% probability of a 25-basis-point Fed rate hike in December. Weak Chinese trade data, with a surplus of $105.28 billion missing the $125.8 billion consensus, further pressured the pair. Investors are now focused on the upcoming US CPI report, which is expected to show a 0.3% MoM increase in headline inflation.
Markets now see an approximately 99% chance of a 25-basis-point Fed rate hike in December, which strengthens the US Dollar, while China's October trade surplus of $105.28 billion came in below the $125.8 billion expected, adding pressure on the Aussie.
The pair trades around 0.6906, below the 100-day SMA at 0.7028 and the 200-day SMA at 0.7056. Below 0.6894, sellers could target the recent low at 0.6855 and then the March low at 0.6834.
Rising expectations of Fed tightening: a roughly 99% implied probability of a 25-basis-point December hike, reinforced by Governor Waller's comments that policy has been less restrictive than anticipated and rates need to rise.