Audusd Falls Ahead Of Us Cpi

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Audusd Falls Ahead Of Us Cpi

Aud/Usd Falls To 0.6650 Ahead Of Us Cpi

AUD/USD has turned lower near the 0.6650 level on Monday. It seems that the weakness in the AUD/USD is driven by a broader recovery in the US Dollar, as the chances of a 0.50% rate cut are now very slim after the NFP release.

The DXY is also showing a modest demand for the US Dollar and is trading near the 101.60 handle. On the way down, the 100.00 remains a strong support while the 101.00 remains a solid resistance.

Fears Of Recession Are No More

If we look back, the markets were fearful that the US was entering into a cycle of recession. However, these fears are no longer valid after August's NFP report.

Although the report showed fewer jobs than last month, it showed a decline in the unemployment rate. So, while the US labor market is still soft, it is not soft enough to put the entire economy into recession.

Now, the majority of the market players believe that the upcoming rate cut will be around 0.25% instead of 0.50%. If we look at the FedWatch tool, there is only a 25% chance of a 50-bps rate cut in September. However, there's a 75% chance of a 25 bps rate cut this month.

Now, it seems that the upcoming rate cut is a done deal, and the focus has shifted to the CPI reading. That's the last piece of the puzzle before we get the first rate cut of 2024.

higher-than-normal CPI reading will change everything for the US Dollar and the AUD by delaying the rate cuts once again.

For now, the AUD is under pressure due to a rising US Dollar. At the same time, the worries over the Chinese economy are also putting a cap on the AUD. Amidst all of this, it makes sense for the Australian Dollar to be on the defensive against the US Dollar.

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