The AUD/USD pair is under pressure for the third consecutive day, reaching its lowest level since August 8, trading near the mid-0.6500s during the early European session. This decline is attributed to renewed buying interest in the US Dollar (USD), bolstered by expectations of a less aggressive policy easing from the Federal Reserve (Fed).
Recent US macroeconomic data indicates robust economic performance, enhancing market expectations that the Fed will adopt a more cautious approach to interest rate reductions this year. Additionally, concerns regarding spending plans proposed by Vice President Kamala Harris and Republican nominee Donald Trump, which may exacerbate the deficit, support elevated US Treasury bond yields. This dynamic has helped the USD Index (DXY) stabilize after a recent pullback from a three-month peak reached on Monday, further pressuring the AUD/USD pair.
In Australia, anticipated consumer inflation data, set to be released on Wednesday, is projected to show an annual rate of 2.9% for the September quarter, the lowest since March 2021. This fuels speculation regarding a potential interest rate cut by the Reserve Bank of Australia (RBA), adding to the downward pressure on the Australian Dollar (AUD).
The ongoing decline in the AUD is also linked to technical selling following last week's breach of the 200-day Simple Moving Average (SMA) support around the 0.6630-0.6625 region. However, the AUD has found some support from reports indicating that China plans to approve over ¥10 trillion in additional debt issuance to stimulate economic conditions, potentially as soon as next week.
Market participants are now focused on the upcoming US economic data, which includes the Conference Board's Consumer Confidence Index and the Job Openings and Labor Turnover Survey (JOLTS). Additionally, US bond yields and overall risk sentiment will play a crucial role in influencing the USD, which could impact the AUD/USD pair ahead of the Australian Consumer Price Index (CPI) report.