CCY Currencies Rallying

Commodity currencies are seeing a strong start to the week across early trading on Monday. With the US Dollar still in decline following last week’s softer-than-forecast October CPI data, high-yielding currencies are benefiting nicely. Headline US inflation was seen cooling to 3.2% from 3.7% prior last month. This drop has been deemed significant enough by traders to rule out any further Fed tightening this cycle, barring any fresh upside inflation surprises. Instead, traders are now starting to price in the first Fed rate cut, due in H1 2024.

US Rates Repricing

The US rates repricing has seen the DXY correcting heavily lower, with the index now down around 3.6% from YTD highs. While this narrative remains in place, USD looks likely to continue lower near-term, allowing commodity currencies room to run higher. Looking ahead this week, we have a slew of US data due on Wednesday before the thanksgiving break on Thursday. Any data weakness seen should help reinforce the view that the Fed will refrain from further tightening, keeping USD pressured near-term.

RBA Minutes on Watch

The upcoming RBA meeting minutes will be a key release to watch overnight tonight, followed by comments from the new RBA governor. While the bank held rates steady last time around, the door was kept open to further tightening. The market seemed to take a dovish interpretation of the meeting so there is room for some hawkish surprises in the minutes which could drive the pair higher this week.

Technical Views

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AUDUSD

The pair is finally breaking higher from the rounded bottom formation which has framed price action over recent months. With momentum studies bullish, while above the .6520 level, the focus is on a continuation higher towards the .6681 level next. The bearish trendline from 2022 highs comes in just ahead of that level and will be the first major test for bulls. 

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