AUD/USD climbs to a fresh monthly high (0.6724) as the larger-than-expected slowdown in the US Consumer Price Index (CPI) fuels speculation for a smaller Federal Reserve rate hike, and the Reserve Bank of Australia (RBA) Minutes may influence the exchange rate should the central bank show a greater willingness to carry its hiking cycle into 2023.

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It seems as though the RBA will implement another 25bp rate hike at its last meeting for 2022 as the “Board expects to increase interest rates further over the period ahead,” and it remains to be seen if Governor Philip Lowe and Co. will adjust the forward guidance for monetary policy as job growth is expected to increase for the third consecutive month.

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Australia is projected to add 15.0K jobs in October following the 0.9K expansion the month prior, and a positive development may generate a bullish reaction in the Australian Dollar as it raises the RBA’s scope to pursue a restrictive policy.

In turn, AUD/USD may continue to appreciate ahead of the RBA meeting on December 6 should Australia’s Employment report generate speculation for higher interest rates, and a further advance in the exchange rate may fuel the recent flip in retail sentiment like the behavior seen earlier this year.

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The IG Client Sentiment (IGCS) report shows 47.59% of traders are currently net-long AUD/USD, with the ratio of traders short to long-standing at 1.10 to 1.

The number of traders net-long is 7.27% higher than yesterday and 26.64% lower from last week, while the number of traders net-short is 24.58% higher than yesterday and 35.50% higher from last week. The decline in net-long position comes as AUD/USD trades to a fresh monthly high (0.6724), while the jump in net-short interest has fueled the shift in retail sentiment as 62.65% of traders were net-long the pair last week.

With that said, another rise in Australia Employment may keep AUD/USD afloat as it puts pressure on the RBA to carry its hiking cycle into 2023, and the exchange rate may attempt to retrace the decline from the September high (0.6916) as it clears the October high (0.6547).

AUD/USD Rate Daily Chart

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Source: Trading View

• AUD/USD continues to trade to fresh monthly highs after clearing the October high (0.6547), and it seems as though the exchange rate will no longer respond to the negative slope in the 50-Day SMA (0.6499) as it holds above the moving average.
• The recent series of higher highs and lows may push AUD/USD towards the Fibonacci overlap around 0.6760 (50% retracement) to 0.6820 (23.6% retracement), with the next area of interest coming in around 0.6910 (23.6% expansion) to 0.6940 (78.6% expansion), which incorporates the September high (0.6916).
• Will keep a close eye on the Relative Strength Index (RSI) as it approaches overbought territory, but failure to push above 70 may undermine the recent advance in AUD/USD, with a move below 0.6650 (50% expansion) bringing the overlap around 0.6460 (61.8% retracement) to 0.6530 (61.8% expansion) back on the radar.

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