Title: AUD/USD faces hurdles around 0.6280 as market mood dampens, yields skyrocket

October 21, 2022 12:02 AM ET

By: AnalysisWatch

The AUD/USD pair came under selling pressure as it tried to break above the critical 0.6280 hurdle in the Tokyo session. The risk-sensitive currencies are feeling the heat as the risk-off impulse returns with sheer force. The asset traded sideways in early Tokyo trading, but market volatility may have dragged it sharply lower.

The U.S. Dollar Index (DXY) rallied sharply, hitting its high for the day at 113.07, and is expected to make an upside breakout soon as U.S. Treasury yields soar. The 10-year U.S. Treasury bond yield has reached 4.26%, the highest level since the subprime crisis.

It appears that market participants are anticipating the Federal Reserve's (Fed) fourth consecutive 75 basis point (bps) rate hike, despite headwinds from the slowdown in the labor market and the decline in retail spending.

Hawkish comments from Fed Governor Lisa Cook have given yields a new boost. Fed policymakers said price growth is unacceptably high and monetary tightening will continue until the central bank observes a slowdown in price pressures over the next several months.

The People's Bank of China's (PBOC) maintenance of the status quo and weak Australian labor market data dramatically affected the antipode market. The PBOC left its monetary policy unchanged despite the travails and turbulence in the economy and lower inflation. The Australian economy added only 0.9k new jobs in September, compared to expectations of 25k.