Risk Aversion Hits Aussie

The Aussie Dollar has come under heavy selling pressure today, with the pair now down almost 3% from the April highs. Part of the driver behind the move is the broad risk aversion we’re seeing in market currently on the back of sliding stock prices yesterday. Weaker-than-expected US data has heightened recession fears once again while concerns for the US banking sector moved back into focus yesterday amidst a fresh plunge in FRC stock. With risk assets under pressure, AUD looks vulnerable to further downside near-term as traders move capital away from higher yielding currencies and into safe havens.

Aussie CPI Falls – RBA Expectations Lowered

Overnight, the latest set of Aussie figures has added to selling pressure. CPI was seen cooling to 6.3% YoY last month, down from 6.8% prior and below the 6.5% the market was looking for. With the RBA having paused its tightening campaign recently, this data reinforces the view that the bank will remain on hold at the next meeting. The RBA cited its intention to continue monitoring inflation and act accordingly meaning that, while inflation continues to cool, tightening expectations will remain muted, keeping AUD pressured.

Technical Views

AUDUSD

The sell off in the Aussie has seen the pair breaking down below the corrective bull channel and below local support at the .6681 level. With momentum studies turned bearish the focus is on a further move lower and a break of the .6535 level support signalling a continuation of the downtrend from YTD highs towards the .6390 level next.