AUD/USD bears head towards Oct daily lows

• AUD/USD bears intent on the Oct lows on a strong USD theme.
• RBA and the Fed are a focus for this pair with a hawkish bias towards the latter.

AUD/USD is flat on the day in quiet Thanksgiving market conditions, although that did not prevent the pair from sliding deeper towards the daily 0.7191 lows printed back in October. The price fell from a high of 0.7209 to a low of 0.7179 on the day. The majority of the supply happening in the London open with lows made in the New York open from where the pair has drifted sideways ever since. 

 The greenback edged lower on the day. It was drifting from its highest level since July 2020 that was printed against the euro, despite the covid concerns in Europe and the expectations that the US Federal Reserve will raise rates sooner than other major central banks. The DXY index, a measure of the US dollar vs a basket of rival major currency pairs fell to 96.652 from a high of 96.806 on the day and 96.887 the cycle high post-FOMC minutes. 

The minutes from the Fed’s Nov. 2-3 meeting boosted the dollar as it was confirmed that the Fed had become more concerned about rising inflation. Various policymakers said they would be open to speeding-up the taper of their bond-buying programme, including Fed’s Mary Daly who now also advocates for a faster pace.

Meanwhile, with the central banks in focus, the Reserve Bank of Australia’s tightening could be elongated, analysts at ANZ Bank argued

”RBA Governor Phillip Lowe’s recent statements about the level of the neutral rate and the flatness of the Phillips curve could combine to imply a faster and more aggressive start to the tightening cycle when it eventually comes. If the RBA goes on slowly regardless of what it ‘should’ do, we may find that the tightening cycle is very elongated.”