• Australian Dollar extends losses despite an upbeat monthly CPI.
• Australia’s inflation rose by 5.2% as expected, up from the 4.9% prior.
• US Dollar (USD) trades around 106.30, the highest since December.
• Upbeat US Treasury yields are contributing support for the Greenback.

The Australian Dollar (AUD) continues the losing streak on the third successive day against the US Dollar (USD) despite hot Australia’s inflation data. However, the AUD/USD pair is failing to capitalize on hot Australian Consumer Price Index (CPI) inflation data due to risk aversion. The decline in commodity prices is capping the upside in the AUD.

Reserve Bank of Australia's (RBA) Minutes from the September monetary policy meeting suggested that if inflation proves to be more enduring than expected, there may be a need for further tightening. Higher inflation could influence the RBA's decision to end the rate-hike cycle.

However, the argument for keeping the current policy unchanged appeared to be more compelling. As a result, this could also potentially limit the upside potential of the AUD/USD pair.

The US Dollar Index (DXY) trades around its highest level since December. This strength in the US Dollar is supported by the upbeat US Treasury yields. The yield on the 10-year US bond note has risen to a level not seen since October 2007.

United States (US) upbeat data released on Tuesday is reinforcing the strength of the Dollar. US Consumer Confidence along with Building Permits and House Price Index improved in the reported period.

Moreover, most members of the US Federal Reserve (Fed) still anticipate further interest rate increases later in the year, which could be attributed to robust economic activities in the US. The Fed recently made the decision to keep the interest rate within the range of 5.25% to 5.50%, maintaining the status quo.

Daily Digest Market Movers: Australian Dollar weakens due to market caution amid solid US Dollar

• Australia’s Monthly Consumer Price Index (YoY) for August rose to 5.2% as expected, up from the previous rate of 4.9%.
• The upcoming October 3 meeting, which will be Michele Bullock's first as a Governor of RBA, is not currently anticipated by the market to result in a rate hike.
• Expectations for a rate increase are on the rise for the November and December meetings by RBA.
• According to Bloomberg's World Interest Rate Probability (WIRP), the likelihood of another rate hike increases to 85% for the first quarter of the following year.
• Market participants will focus on Australia’s Retail Sales for August on Thursday, which is expected to grow by 0.3% lower than the previous rate of 0.5%.
• Bloomberg has reported, citing unnamed sources, that Hui Ka Yan, the billionaire chairman and founder of China Evergrande Group, has been placed under police control. According to these sources, he was taken into custody earlier this month and is currently being monitored at a specified location.
• The hawkish remarks from Fed officials have led to a broad-based strengthening of the US Dollar (USD) and have acted as a headwind for the AUD/USD pair.
• US Consumer Confidence released on Tuesday for September decreased to 103.0 from the previous reading of 108.7 in August.
• Building Permits improved to 1.541M in August from 1.443M prior. While the House Price Index (MoM) for July rose to 0.8% compared to the market expectations of 0.5% from the previous rate of 0.4%.
• Minneapolis Fed President Neel Kashkari stated on Tuesday that one more rate hike is expected through the end of this year 2023.
• Traders await the US Durable Goods Orders report to be released on Wednesday. Additionally, the Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation, is due on Friday. The annual rate is expected to reduce from 4.2% to 3.9%.

Technical Analysis: Australian Dollar hovers below 0.6400 psychological level, support at monthly low

Australian Dollar trades higher around 0.6400 psychological level during the Asian session on Wednesday. AUD/USD pair could find a barrier around the 21-day Exponential Moving Average (EMA) at 0.6433, followed by the 0.6450 psychological level. A firm break above the latter could support the AussieDollar (AUD) to explore the region around 26.6% Fibonacci retracement at 0.6484 level. On the downside, the AUD/USD pair could find the key support around the monthly low at 0.6357 aligned to the 0.6350 psychological level.

AUD/USD: Daily Chart