AUD/USD bucks the trend, breaks above 0.7200 after hot US inflation report

• Despite US inflation reaching the highest level since 1982, the greenback weakens.
• AUD/USD traders faded the downward reaction followed by a 90-pip rally, from 0.7140 to 0.7250.
• Treasury yields rise, led by the 10-year benchmark note, piercing the 2.00% threshold.

The AUD/USD advances sharply following the release of US inflation data, which rose the highest since 1982. At the time of writing, the AUD/USD is trading at 0.7237 for a gain of 0.77%.

Before Wall Street opened, the Department of Labor released January Consumer Price Index (CPI) figures, which showed prices increased 7.5%, higher than the 7.3% foreseen on annual figures. Excluding volatile items like food and energy, the so-called Core CPI broke the 6% threshold, higher than the 5.9% estimations.

Market’s reaction

On the release, the AUD/USD dipped as low as the S1 daily pivot at 0.7147, followed by a jump of 80-pips so far, approaching the 100-day moving average (DMA) at 0.7247. The US 10-year Treasury yield reached the 2% mark, advancing six basis points.

In the meantime, the US Dollar Index, a gauge of the greenback’s value against a basket of its peers, has fallen 0.17%, to sit at 95.33.

During the Asian Pacific session, the Australian economic docket featured Building Permits on its monthly reading for December, alongside Consumer Inflation Expectations for February. The former came in at 8.2%, as foreseen by market players, while the latter arrived at 4.6% with no forecast. 

In the US, alongside inflation figures, Initial Jobless Claims for the week ending on February 5 rose to 223K, better than the 230K forecasted by economists, while Continuing Jobless Claims stayed unchanged at 1,621K compared to the revision of the previous week.

AUD/USD Price Forecast: Technical outlook

Now that US CPI is in the rearview mirror, the AUD/USD is neutral biased, despite the 90-pip jump in the session. The 50-DMA at 0.7166 is under the spot price, while the 100-DMA and the 200-DMA reside above the spot price, suggesting that the AUD/USD is tilted to the downside.

It is worth noting at time of publication, however, that a five-month-old downsloping trendline, with resistance around 0.7220, witnessed a break, which a daily close above the latter could confirm.

To the upside, the AUD/USD first resistance would be the 100-DMA at 0.7247. A break of that ceiling would expose the January 13 daily high at 0.7313, followed by the 200-DMA at 0.7366.