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14 Mar 2023

AUD/USD lacks any firm direction, remains confined in a range below 0.6700 post-US CPI

  • AUD/USD struggles to capitalize on its modest intraday bounce from the 0.6630 area.
  • Rebounding US bond yields continues to underpin the USD and cap gains for the pair.
  • The latest US consumer inflation figures do little to provide any impetus to the major.

The AUD/USD pair reverses an early North American session dip and climbs to a fresh daily peak following the release of the latest US consumer inflation figures. Spot prices, however, struggle to capitalize on the modest intraday uptick and remain below the 0.6700 round-figure mark, at least for the time being.

The US Dollar comes under some selling pressure after the US Bureau of Labor Statistics reported that the headline CPI rose by 0.4% in February as compared to the 0.5% recorded in the previous month. Adding to this, the yearly rate decelerated from 6.4% to 6.0% during the reported month. This, in turn, reaffirms expectations that the Federal Reserve will slow, if not halt, its rate-hiking cycle amid the strain on the US banking system, which, in turn, weighs on the Greenback and lends support to the AUD/USD pair.

That said, the Core CPI, which excludes volatile food and energy prices, came in at 0.5% on a monthly basis, beating estimates for a reading of 0.4%. This comes on the back of easing fears of a broader systemic crisis, which remains supportive of a strong intraday rally in the US Treasury bond yields, which helps limit the downside for the USD. Apart from this, the Reserve Bank of Australia's (RBA) recent dovish shift, signalling that it might be nearing the end of its rate-hiking cycle, contributes to capping the AUD/USD pair.

Hence, it will be prudent to wait for a sustained strength above the 0.6700 mark and a subsequent move beyond the overnight swing high, around the 0.6715 region, before placing fresh bullish bets around the AUD/USD pair. Moreover, the lack of any meaningful buying warrants some caution before confirming that spot prices have bottomed out in the near term and that the recent downfall witnessed since early February has run its course.

Technical levels to watch

 

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