AUD/USD regains 0.7750, up for first weekly gain in three amid downbeat USD

• AUD/USD stays firmer after snapping two-day, two-week downtrend.
• US dollar tracks weaker Treasury yields, back gains of equities, commodities and Antipodeans.
• US inflation jumped to multi-month high, ECB revised up economic forecasts, Aussie data were positive too.
• US bipartisan Senators teased agreement on infrastructure deal.

AUD/USD holds onto the previous day’s recovery moves from the weekly bottom around 0.7755-50 amid the early Friday morning in Asia. The quote refreshed week’s low in a quick reaction to the US Consumer Price Index (CPI) data before adding more than it lost to head for the first daily gain in three days, not to forget snapping a two-week south-run.

The sustained weakness of the US Treasury yields stopped the US dollar from recovering despite strong inflation. This in turn pushed equities and commodities, also helping the Aussie pair.

No fears of known things…

Although the key US economics unveiled higher-than-expected price pressure into the world’s largest economy, markets offered a little reaction the previous day. The reason could be traced to the fact that the US Federal Reserve (Fed) has already signaled this to happen and termed it “transitory”. That said, the headlines US CPI marked the fastest jump since 2008 to 5.0% YoY while the Core CPI rallied to the highest in 30 years with a 3.8% figure.

It’s worth noting that the European Central Bank (ECB) matched wide market forecasts to keep the policy settings unchanged but revised up economic projections. As per the latest ECB guide, the GDP is likely to grow by 4.6% this year (up from 4.0%) and 4.7% in 2022 whereas inflation is upwardly revised to 1.9% for 2021 and 1.5% for 2022.

Elsewhere, the news suggesting US bipartisan Senators’ agreement over the infrastructure deal and the Sino-American Commerce Ministers’ positive hints for the trade and investment ties also back the AUD/USD moves.

It should, however, be noted that the chatters over the UK and the US-backed push to the Group of Seven (G7) allies to recall investigation over the covid origin and differences with China probed the market optimism on Thursday.

Amid these plays, US 10-year Treasury yields refreshed three-month low while the Wall Street benchmarks also cheered the bond-buying. However, the US dollar index (DXY) dropped, which in turn helped AUD/USD.

Given the latest news over the US infrastructure spending plan approval, coupled with the start of the G7 meeting, AUD/USD may have a volatile day despite a lack of major data/events at home. On the other hand, US Michigan Consumer Sentiment Index for June, expected 84 versus 82.9 prior, will decorate the calendar.

Technical analysis

A convergence of 50-day and 100-day SMA, around 0.7730-25, repeatedly restricts short-term AUD/USD downside, suggesting another bounce to the 0.7800 threshold. However, any further advances will be capped by the 0.7820 hurdle.