AUD/USD fell on Tuesday as rising US inflation expectations revived Fed tightening bets and a tech-stock selloff sapped risk appetite. A bearish engulfing candle now points to a possible retest of the 200-day moving average at 0.6872.
The Australian dollar slid overnight as both of its main drivers turned against it at once: firmer US rate expectations and a fresh retreat in risk appetite. Analyst David Scutt describes AUD/USD as a two-part front-end rates play, one-part risk proxy, a relationship that leaves it exposed when both forces move the same way.
Inflation expectations revive Fed hike bets
The overnight repricing traced back to the New York Fed's June Survey of Consumer Expectations. Median one-year inflation expectations rose 0.2 percentage point to 3.7%, the highest since September 2023, while three-year expectations climbed by the same amount to 3.3%. Both measures increased even as respondents expected gasoline prices to rise at their slowest pace since August 2022.
Markets responded by adding to tightening bets. Futures now imply around 42 basis points of additional tightening over the next 12 months, up from about 33.5 basis points a day earlier. That lifted US front-end Treasury yields relative to Australian debt, narrowing the Australia-US 2-year spread and weighing on the Aussie.
Risk appetite retreats
Sentiment offered no support. Technology stocks stayed under pressure amid growing questions over whether excessive AI infrastructure spending remains warranted, with Amazon's latest bond offering drawing softer demand than a similar deal earlier this year. Even Samsung's blowout earnings failed to satisfy investors' lofty expectations, extending profit-taking across semiconductor names.
Geopolitics added to the caution. After renewed attacks on shipping in the Strait of Hormuz, the United States revoked the licence permitting Iranian crude exports and launched retaliatory strikes against Iranian military targets.
Bears regain the technical edge
A bearish engulfing candle formed on the daily chart on Tuesday, after the rebound stalled at the 23.6% Fibonacci retracement of the April 2025-June 2026 bull move. The setup points to a possible retest of the 200-day moving average at 0.6872 and the late-June swing low at 0.6866.
The pair remains in a downtrend of lower highs and lower lows, and a break below the June low at 0.6866 would expose the late-March low at 0.6835. Traders now watch today's RBNZ decision, which often spills over into AUD/USD, and the June FOMC minutes for whether the hawkish tone holds after a possible interest rate hike later this year.
Source: Investing.com
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