AUD/USD: downside underpinned with eyes on a break of 0.7800

• Aussie CPI in focus
• US dollar has turned political
• Commodities softer on strong dollar
• Technicals lean bearish

AUD/USD finished the NY session below the 0.7820 double bottom support level and hit a low of 0.7796. 

AUD/USD has been hurt on commodities unable to find traction in a stronger US dollar environment while spreads between AU-US remain favourable to the downside in the pair. The RBA is in no hurry to hike rates at this stage, but the Q3 CPI data will be key for the Aussie this week while, elsewhere, the dollar will be driven by developments in Congress over tax reform and odds of the Fed becoming more hawkish as time goes by, supporting the case for further downside. 

US dollar is now political again, a revival of the Trump trade?

The recent downside in the Aussie has tallied up with the noise around Trump making an announcement that he is very close to making a decision on who the next Fed chair will be. 

The choice of the next Fed Chair in addition to speculation regarding the ability of the GOP to push through tax reform this year remain as the key drivers for US yields and the US dollar. "If President Trump chooses to nominate a “hawk”, such as John Taylor or Kevin Warsh, as the next Fed Chair then there could be upside to our prediction of a December 25bp Fed rate hike, followed by two more in 2018," explained the analysts at ING Bank. Also, Taylor is a dove on regulation and thus that also equates to a stronger dollar and more business activity, in line with Trump's preferences for Wall Street.   

 AUD/USD levels

Technicals lean bearish now that the price has dropped below the daily cloud (0.7850) and the 100-D SMA around 0.7820 with readings turning negative on the 4-hr sticks as well. The downside target on the wide comes below the 0.7700 level with 0.7679 ahead of 0.7631 as the 50-W SMA and the 0.7444 2016-2017 uptrends. A break above 0.7900 opens 0.7930 as the 50% retracement level.