AUDUSD Struggles to Protect 0.6400, Australian Consumer Expectations Lower, US CPI Takes a Look

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AUDUSD holds lower position after biggest daily loss in a month.
China’s covid crisis, weak inflation data combined with pre-US inflation concerns to weigh on prices.
Dovish comments from the RBA’s Bullock reinforced bias.
Aussie Consumer Inflation Expectations may provide the latest direction but US CPI is the key.

AUDUSD forces the pair to retrace 0.6400, despite a recent rally around 0.6420, amid choppy markets. In doing so, the Aussie pair extended the previous day’s losses, the biggest in a month, in the early hours of the crucial Thursday.

The risk associated with China can be considered as a major contributor to the movement of the AUDUSD pair in the previous day. Fears from the dragon species have grown after six months of daily covid increases and new lockdowns in another state. In addition, China’s inflation rate weighed heavily on the pair. That said, the headline Consumer Price Index (CPI) fell to 2.1% against 2.4% market forecasts and 2.8% before. However, the Producer Price Index (PPI) increased to -1.3% compared to the -1.5% expected and 0.9% in previous readings.

Elsewhere, dovish comments from Reserve Bank of Australia (RBA) Deputy Governor Michele Bullock also contributed to weakness in the AUDUSD pair. There are “good reasons to think we are approaching this rate hike,” the RBA’s Bullock said on Wednesday. The lawmaker added, “We’ve already raised prices the hard way.”

It should be noted that the fear of government gridlock in the US, due to the mid-term elections, has also created pressure on two vulnerable populations.

On the other hand, the president of the New York Federal Reserve (Fed) John Williams gave some comments about the expectations of the increase in prices in the text of the speech given to the audience in Zurich. “Prospects of long-term inflation stability is good news,” said the policymaker.

In addition, mixed topics around Russia also tried to deal with the threat but failed to make much of an impact. Russia appears to be withdrawing from the capital of the only captured Ukrainian region, Kherson, as President Vladimir Putin will not attend the upcoming G-20 summit in Bali, starting November 15.

In the middle of the game, equities returned to the red after a three-day absence as US Treasury yields remained depressed. Despite this, the US Dollar Index (DXY) eased to a six-week low to post its first daily triple-digit gain.

Further, the Australian Consumer Price Index for November, which is expected to be 5.7% against 5.4% before, will lead the US Consumer Price Index (CPI) for October, which is expected to be 8.0% against 8.2% before, correcting the recent movement of AUDUSD.

Due to recent RBA comments and risk sentiment, AUDUSD may remain on the bear’s radar unless the US inflation rate disappoints traders with big misses.