- Despite US inflation reaching the highest level since 1982, the dollar is weakening.
- AUD/USD traders faded the downside reaction followed by a 90 pip rally from 0.7140 to 0.7250.
- Treasury yields rise, led by the 10-year yield, breaking above the 2.00% level.
The AUD/USD advances sharply after the release of US inflation data, which rose to its highest level since 1982. At time of writing, AUD/USD trades at 0.7237 for a gain of 0.77%.
Before Wall Street opened, the Department of Labor released Consumer Price Index (CPI) figures for January, which showed prices rose 7.5%, above the 7.3% expected in annual figures. Excluding volatile items like food and energy, the so-called Core CPI came in above the 6% level, above estimates of 5.9%.
market reaction
Following the data release, AUD/USD fell as low as the S1 daily pivot at 0.7147, followed by an 80 pip jump so far, approaching the 100-day moving average (DMA) at 0.7247. The 10-year US Treasury yield hit the 2% level, advancing six basis points.
Meanwhile, the US Dollar Index, a gauge of the dollar’s value against a basket of its peers, has fallen 0.17% to settle at 95.33.
During the Asian session, the Australian economic docket presented building permits in its monthly reading for December, along with consumer inflation expectations for February. The first came to 8.2%, as expected by market players, while the second came to 4.6% without forecast.
In the US, along with inflation figures, initial jobless claims for the week ending February 5 rose to 223,000, better than the 230,000 forecast by economists, while continued jobless claims held steady. unchanged at 161,000 compared to the previous week’s revision.
AUD/USD Price Forecast: Technical Outlook
Now that the US CPI is in the rear view mirror, AUD/USD has a neutral bias, despite the 90 pip jump on the session. The 50-DMA at 0.7166 is below the spot price, while the 100-DMA and 200-DMA are above the spot price, which suggests that the AUD/USD is tilted to the downside.
However, it is worth noting at press time that a five-month downtrend line, with resistance around 0.7220, witnessed a break, which a daily close above the latter could confirm.
To the upside, the first resistance for AUD/USD would be the 100 DMA at 0.7247. A break of that top would expose the Jan 13 daily high at 0.7313, followed by the 200 DMA at 0.7366.
Additional technical levels
Source: Fx Street
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