AUD/USD hits 5-month highs and holds above 0.7100 ahead of Wall Street close

• Australian inflation data beats expectations and increases the chances of a rate hike by the RBA.
• Mixed sentiment as Wall Street fluctuated between gains and losses.
• AUD/USD Price Analysis: A daily close above 0.7100 will pave the way for further gains.

The Australian dollar (AUD) hit a new five-month high of 0.7122 against the US dollar (USD) on Wednesday, following the release of Australian inflation data that cemented the case for further tightening by the Reserve Bank of Australia (RBA). ). Except for the Australian dollar, risk aversion is keeping high-beta currencies under pressure. Hence the AUD/USD pair is trading at 0.7106 at the time of writing.

Australian CPI data justifies another RBA hike

Wall Street has shed some of its earlier losses, though it’s a mixed bag with the S&P 500 and Nasdaq posting gains, while the Nasdaq fluctuates. The absence of economic data on the US agenda left AUD/USD adrift, pending economic data from Australia.

Earlier in the Asian session, the Australian Bureau of Statistics revealed that the Consumer Price Index (CPI) rose 1.9% in the fourth quarter, above estimates of 1.6%, while annual rates rose to 7.8. % from 7.3%, its highest level since 1990. Some analysts estimated that the RBA could pause its cycle of increases amid fears of a global recession. However, the CPI report raised the likelihood of a 25 basis point rate hike by the RBA at the February 7 meeting, five days after the US Federal Reserve’s (Fed) policy meeting.

Digging deeper into the report, the trimmed CPI core rose 1.6%, above estimates of 1.4%, while year-on-year rose 6.9%, up from 6.1% last month. Therefore, money market futures have started trading 50 basis points higher, implying a high of 3.60%, up from 3.40% just before the CPI release.

Consequently, AUD/USD extended its gains and prepared to test the August 11 daily high of 0.7136, which could soon be the main eye to close above 0.7100.

AUD/USD Technical Analysis

Technically speaking, AUD/USD is still biased to the upside, and if it makes a daily close above 0.7100, it will open the door for further gains. The oscillators confirm the bullish trend. Although far from overbought conditions, the Relative Strength Index (RSI) continues to point higher. At the same time, the Exchange Rate (TCC) experienced a volatility jump on two consecutive days, suggesting that buyers are stepping in.

Therefore, the first resistance for AUD/USD would be the August 2022 high at 0.7136. A break above will expose 0.7150, ahead of the 0.7200 psychological level.