• AUD/USD dropped to near one-month lows in reaction to stronger US CPI print.
• The downtick was bought into amid some repositioning ahead of Aussie jobs data.
• The risk-off impulse, hawkish Fed expectations should cap the upside for the pair.

The AUD/USD pair quickly reversed the US CPI-led fall to near one-month lows and was last seen trading with only modest intraday losses, around the 0.7365-70 region.

The pair added to the previous day's heavy losses and witnessed follow-through selling for the second successive day amid resurgent US dollar demand on Wednesday. The downward trajectory extended through the early North American session following the release of hotter-than-expected US consumer inflation figures.

In fact, the headline CPI rose 0.9% MoM in October – marking the largest advance in four months – and the yearly rate accelerated to 6.2% or the most since 1990. Adding to this, the annual Core CPI (excluding volatile food and energy prices) increased 4.6% as against the expectation for a steady reading of 4%.

The data added to concerns about persistent inflationary pressures and reinforced speculations about an early policy tightening by the Fed. This, in turn, acted as a tailwind for the US Treasury bond yields. Apart from this, a softer risk tone benefitted the safe-haven USD and weighed on the perceived riskier aussie.

The AUD/USD pair to an intraday low level of 0.7340, though the slide was quickly bought into as the markets have been pricing in the possibility of a Fed rate hike move in 2022. Investors also prefer to wait for a fresh catalyst from Thursday's release of the Australian jobs report before placing fresh directional bets.

Nevertheless, a sustained break/acceptance below 100-day SMA favours bearish traders and supports prospects for an extension of the recent downward trajectory. Hence, the attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 0.7400 round-figure mark.

Technical levels to watch