AUD/USD sticks to softer Aussie CPI-led weakness, below 0.7100 handle

   “¢   Softer Australian inflation figures prompt some fresh selling on Wednesday.
   “¢   Subdued USD demand lends some support and helps limit further downside.
   “¢   Traders now eye US private sector employment details for short-term impetus.

The AUD/USD pair maintained its offered tone through the early European session, albeit has managed to recovery few pips from the post-Aussie CPI swing low.

The pair struggled to build on the previous session’s strong up-move beyond the 0.7100 handle and met with some fresh supply following the release of the Australian quarterly inflation report. The headline CPI for the September quarter came in at 0.4% and the yearly rate eased to 1.9% from 2.1% y/y in Q2.  

Meanwhile, the annual pace of the average of the core measures decelerated further to 1.7% in Q3, down from 1.8% y/y in Q2 and 2.0% in Q1 2018. The six-month annualized growth in core inflation was only 1.5%, which was well below the bottom of the RBA target band and the slowest pace since September 2016.

The post-CPI selling pressure now seems to have abated and was now finding some support from a subdued US Dollar demand. Despite a goodish pickup in the US Treasury bond yields, the USD consolidated recent strong gains to 16-month tops and turned out to be the only factor helping limit further losses, at least for the time being.

Moving ahead, today’s US economic docket, featuring the release of ADP report on private sector employment, will now be looked upon for some fresh impetus later during the early North-American session. The key focus, however, will be on Friday’s closely watched US monthly jobs report, which might help determine the pair’s next leg of directional move.

Technical levels to watch

On a sustained move back above the 0.7100 handle, the pair is likely to accelerate the up-move towards overnight swing high level of 0.7122 en-route the 0.7140-50 supply zone. On the flip side, sustained weakness below the 0.7075-70 region might turn the pair vulnerable to slide back towards the 0.7050-40 horizontal support before bears aim towards challenging the key 0.70 psychological mark.