A broad decline in the US dollar is underway as the market fades the idea of a 100 bps FOMC hike later this month. At the same time, risk assets are cheering the prospect of a year-end pause in hikes and signs that inflation expectations have peaked.
AUD/USD is benefiting from both those factors and is now up 50 pips on the day to a session high of 0.6845.
It's too early to be talking about a bigger turnaround in AUD/USD. Thursday's low as the worst level since the peak of the pandemic and we're still 50 pips away from positive for the week.
To even be cautiously optimistic, I think the AUD bulls will need to see a break of 0.6874, which was the July 8 high.
All that said, there's plenty to like in terms of global fundamentals. China appears to want a thaw in relations with Australia and stimulus from Beijing is coming.
If the Fed tempers its enthusiasm for rate hikes, there's room for risk assets and AUD to run.
