AUD/USD: The Australian dollar is trying to rise

AUD/USD regains strength in the near term

AUD/USD has been trying to move higher since last week after hitting a two-year low of $0.62. The Australian dollar rose around 200 pips thanks to the renewed risk appetite of market participants since last week and the drop in US bond yields since the start of the week.

AUD/USD has also benefited since last night from the acceleration of inflation in Australia, which reached its highest level since 1990 in the third quarter. Inflation rose to 7.3% from 6.1% in the second quarter, beating the consensus forecast of 7.0%, but it does not appear to drastically change investors’ expectations for rate hikes. The probability of an interest rate hike at the next meeting has of course increased from 91% to 99%, but short-term bond yields of 1 and 2 years remain stable.

Although AUD/USD may continue to benefit from renewed risk appetite in the near term, the underlying outlook remains bearish. The deterioration of global economic fundamentals and outlook should worsen with the tightening of monetary policy, the global energy crisis and the difficulties of the Chinese economy to recover.

This last point weighs even more heavily on the Australian dollar, as Beijing is by far Canberra’s biggest customer, despite the geopolitical tensions between the two countries.

AUD/USD Daily Price Chart – Key Levels

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