AUD/USD Price Analysis: Aussie Rallies on Easing US Inflation

• CPI figures from the United States revealed a 0.1% reduction last month.

• There’s more speculation that the Federal Reserve will scale back its rate hikes.

• Financial markets factored in a 25 basis point rate increase at the next Fed meeting.

Today’s AUD/USD price analysis is bullish. The dollar fell versus the Australian dollar following data showing a decline in US inflation on Thursday, fueling speculation that the Federal Reserve will scale back its rate hikes going forward.

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Consumer price index (CPI) figures from the United States revealed a 0.1% reduction last month, the first drop since May 2020, when the economy was in shambles due to the first wave of COVID-19 infections.

The CPI went up 6.5% in the year that ended in December. It came after a 7.1% increase in November and was the weakest since October 2021. The annual CPI reached its highest point in June, peaking at 9.1%, the highest increase since November 1981. However, the Fed’s 2% target for inflation still needs to be reached.

Fed policymakers said that the central bank’s target rate was still expected to increase above 5% and remain there for some time despite market bets to the contrary. They expressed relief that price pressures were lessening, clearing the way for a potential halt in interest rate hikes.

The Federal Reserve last year increased its policy rate by 425 basis points, bringing it to a range of 4.25% to 4.50%, the highest level since late 2007. 

According to CME’s FedWatch Tool, financial markets have already factored in a 25 basis point rate increase at the Fed’s meeting on January 31–February 1.

AUD/USD key events today

Investors will continue to focus on the US inflation report since no significant economic releases from the US or Australia are slated for today.

AUD/USD technical price analysis: Buyers set to go beyond the 0.6980 level

The 4-hour chart shows AUD/USD in a bullish trend, with the price trading above the 30-SMA and the RSI above 50. The price broke above the 0.6951 resistance level with a strong bullish candle, making a new high around the 0.6980 level.

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Bears came in at this level to try and push the price below the 30-SMA but failed to close below the 0.6951 key level. From here, bulls are getting ready to retest and possibly break above the 0.6980 level.

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