AUD/USD stumbles below 0.6500 amidst a soft US dollar

• AUD/USD is trimming some of its Wednesday gains on Thursday.
• Mixed US economic data, a headwind for the Aussie, which tumbled despite broad US dollar weakness.
• US central bank restrictive monetary policy commentary continued, led by Mester and Bullard.
• Australia’s inflation eased ahead of the RBA’s October meeting.

The AUD/USD retraces from weekly highs reached on Wednesday, when the Aussie hit a weekly high at 0.6530, though positive US economic data, showing that the labor market remains robust, would not deter the Federal Reserve from continuing tightening monetary conditions. Therefore, the AUD/USD is falling..

At the time of writing, the AUD/USD is trading at 0.6474, after hitting a daily high of 0.6524, below its opening price, by a solid 0.74%.

Before Wall Street opened, US economic data released by the US Departments of Commerce and Labor flashed mixed signals regarding the current economic status of the US. According to the former, the US Gross Domestic Product (GDP) for the second quarter was confirmed at a 0.6% contraction, aligned with forecasts and the previous reading, confirming that the US economy is in a technical recession.

Contrarily, US Initial Jobless Claims for the past week, ending on September 24, decelerated at a 193K pace to a five-month low, crushing estimates of 215K. Worth noting that a smoother reading for claims, namely the four-week moving average, dropped for the fifth consecutive week to 207K.

In the meantime, Fed officials remained active during the day. Cleveland’s Fed Loretta Mester said Trade-offs with growth would become more relevant as inflation comes back down. She added that given inflation persistence, she “still puts more weight on being sure the fed does enough.”

“We’re still not even in the restricted territory on the funds rate,” she added.

Earlier, the St. Louis Fed President James Bullard said that the Fed is determined to get inflation to the right level of policy rates, so they can achieve the Fed’s inflation goal. He acknowledged that the US might get into a recession as the Fed brings inflation down, though he emphasized that it’s not “his base scenario.”

Earlier, in the Asian session, Australia reported inflation for August, which dropped slightly due to falling gasoline prices, as data have shown, ahead of the Reserve Bank of Australia (RBA) monetary policy meeting next week. Australia CPI rose by 6.8% YoY, less than July’s 7%,

On Friday, the Australian economic calendar will feature Housing Credit and Private Sector Credit readings. On the US front, the Fed’s favorite inflation gauge is the Core PCE Price Index, the Chicago PMI index, and the University of Michigan Consumer Sentiment will be reported.

AUD/USD Key Technical Levels