Hits Highest Since Mid-September

AUD/USD rose overnight as the greenback softened. The lower USD came even as the FOMC minutes showed the board considering a taper as early as November, while CPI rose above expectations. The pair rose to highs of 0.7382, the highest level since September 10, and closed near session highs. Last trading up 1 pips at 0.7380.

• Fitch revised the outlook of Australia's credit rating to stable from negative. Fitch said they expect the economic recovery to continue and noting confidence in fiscal consolidation, Fitch this was support by "the underlying strength of the economic recovery, despite a near-term setback from recent pandemic-related lockdowns".
• From a technical perspective AUD/USD traded higher again Tuesday. The pair remains above the 20- and 50-day EMAs. Although the recent recovery is considered corrective, the break above these averages suggests scope for an extension of gains. The focus is on 0.7405 next, a Fibonacci retracement. A break would expose 0.7478, Sep 3 high and a key short-term resistance. Support levels to watch lie at 0.7226, Oct 6 low and 0.7170, Sep 29 low. The latter is a bear trigger.
• Labour market data headlines the domestic data docket today. CBA writes: "AUD can fall today if we are right Australian employment slumped by another 200,000 in September compared to the median consensus estimate for a decrease of 110,000 (11.30am Sydney time). We estimate the unemployment rate jumped from 4.5% to 5.0% (consensus: 4.8%). The September report will capture the impact of Victoria's lockdown. We do not expect the labour market to improve until November. Policy tightening by the RBA remains a long way off, capping AUD."