AUD/USD flat-lines around 0.7100, just below multi-month top after US data

The AUD/USD pair is seen oscillating in a narrow trading band on Friday and consolidating its recent strong gains to the highest level since June 2022 touched the previous day. The pair is currently placed around the 0.7100 mark, nearly unchanged for the day, as traders digest key US macro data before the week wraps up.

The Fed's preferred inflation gauge - the Core PCE Price Index - released on Friday, came out at 0.3% MoM, slightly above 0.2% estimates and 0.2% previous MoM, and at 4.4% YoY from 4.7% previously. The slight gain in core inflation gave some marginal support to the US Dollar as it reduces the chances the Federal Reserve will turn dovish later in the year, but so far the currency has failed to follow through its initial lift to the upside. 

Markets still expect less aggressive policy tightening by the Fed, and are pricing in a smaller 25 bps Fed rate hike move in February, which, in turn, keeps a lid on any meaningful upside for the Greenback. Apart from this, rising odds for an additional rate hike by the Reserve Bank of Australia (RBA) in February, bolstered by the stronger domestic CPI report on Wednesday, underpin the domestic currency and acts as a tailwind for the AUD/USD pair.

Friday's US economic docket also featured the release of Pending Home Sales data and the revised Michigan Consumer Sentiment Index, both of which came in above estimates, with Home Sales registering an unexpected 2.5% rise in December versus the -0.9% expected. The focus now shifts to the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced next Wednesday. Heading into the key event risk, the major is more likely to prolong its consolidative price move. 

From a technical perspective, despite the upbeat US data, the dominant medium-term uptrend remains intact, favoring bullish bets. Indeed the daily price chart may even be showing signs of having developed a continuation pattern presaging higher prices, although the Relative Strength Index (RSI) on a 14-day setting sits just under overbought, suggesting any such up move may be short-lived. 

Technical levels to watch