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  • AUD/USD built on the overnight bounce from sub-0.7600 levels amid sustained USD selling.
  • Tuesday’s rather unimpressive US CPI, sliding US bond yields continued undermining the USD.
  • A positive risk tone further benefitted the perceived riskier aussie and remained supportive.

The USD bearish pressure remained unabated through the first half of the trading action on Wednesday and pushed the AUD/USD pair to three-week tops, around the 0.7680-85 region in the last hour.

A combination of supporting factors assisted the pair to gain traction for the second consecutive session and build on the previous day’s goodish rebound from sub-0.7600 levels. The US dollar added to the overnight losses led by rather unimpressive US consumer inflation figures. This, along with a generally positive tone around the equity markets, provided an additional boost to the perceived riskier aussie.

Data released on Tuesday showed that the headline US CPI recorded the biggest increase since August 2012. This, however, failed to provide strong evidence of broadening price pressures, instead reinforced the Fed’s view that higher inflation will be transitory. The US Treasury bond yields turned sharply lower following the release, which, in turn, weighed heavily on the greenback and lifted the AUD/USD pair.

Meanwhile, the US Food and Drug Administration (FDA) recommended pausing the rollout of Johnson & Johnson’s coronavirus vaccine after six women developed rare blood clots. This could potentially slow down the reopening of the US economy and was seen as another factor that further aggravated the bearish pressure surrounding the USD, allowing the AUD/USD pair to challenge the top boundary of a multi-week-old trading range.

It will now be interesting to see if bulls are able to capitalize on the momentum or the AUD/USD pair meets with some fresh supply amid slightly overbought conditions on hourly charts. There isn’t any major market-moving economic data due for release from the US on Wednesday. Hence, the key focus will be on a scheduled speech by Fed Chair Jerome Powell, which might influence the USD price dynamics and produce some short-term trading opportunities.

Technical levels to watch