AUD/USD Struggles Near Weekly Lows as US CPI Data

Sep 12

The AUD/USD currency pair exhibited a period of consolidation near the 0.6640 level, marking a weekly low, during the initial half of the trading day. This stability came amid a notable absence of significant economic data, although the US Dollar experienced a slight retreat, influenced by the strengthening of the Japanese Yen.

The situation shifted dramatically following the release of the United States Consumer Price Index (CPI) figures. Although the overall CPI numbers met market expectations, the annual core CPI unexpectedly rose by 0.3%, exceeding both forecasts and the previous figure of 0.2%. This development tempered hopes for an aggressive 50-basis-point rate cut by the Federal Reserve in their upcoming meeting, leading to a subsequent decline in the AUD/USD pair.

From a technical standpoint, the pair has already reached its take-profit target, and the Australian Dollar has shown a reaction to a Demand area with a noticeable spike recorded yesterday. The latest Commitment of Traders (COT) report paints a contrasting picture: while retail traders are increasing their long positions on the AUD, institutional investors, often referred to as "smart money," are opting for short positions. This divergence between retail sentiment and institutional positioning suggests that while retail traders are optimistic about the AUD, the underlying institutional sentiment remains bearish.

Considering these dynamics, there is a significant likelihood that the AUD/USD pair could continue to decline, potentially retesting the lower Demand area in the coming days. Traders are advised to remain vigilant and monitor key technical levels, as the mixed signals from retail and institutional participants may lead to heightened market volatility.

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