AUD/USD climbs toward 0.71 as USD weakens on soft inflation data

• US Core CPI comes in above market expectation.
• US Dollar Index retreats toward 97 handle.  
• Housing data from Australia disappoint on Tuesday.

After posting decisive gains on Monday, the AUD/USD pair struggled to extend its rally on Tuesday following the disappointing housing data from Australia. However, with the greenback coming under a renewed  bearish pressure in the last hour, the pair started to climb to a fresh daily high at 0.7087 and was last seen trading at 0.7082, up 0.18% on a daily basis.

The Australian Bureau of Statistics on Tuesday reported that home loans declined by 2.6% on a monthly basis in January following December’s 6% growth and fell short of the market expectation of 1%. Moreover, the National Australia Bank’s Business Confidence Index eased to 2 in February from 4 in January.

In the second half of the day, the US Dollar Index, which rose to a session top of 97.28, reversed its course after the inflation in the U.S., as measured by the Consumer Price Index, rose 0.2% on a monthly basis in February and brought the annual rate down to 1.5% from 1.6%. The core-CPI, which excludes energy and food prices, also ticked down to 2.1% annually  to further weigh on the greenback. At the moment, the DXY is at clinging to small daily gains at 97.05.

In the Asian session on Wednesday, Westpac Consumer Confidence data from Australia will be looked upon for fresh impetus.

Key technical levels

The pair could face the initial resistance at 0.7105 (20-DMA) ahead of 0.7140 (50-DMA) and 0.7185 (Feb. 25 high). On the downside, supports are located at 0.7055 (Mar. 12 low), 0.7025 (Mar. 11 low) and 0.7000 (psychological level/Mar. 8 low).