AUD/USD surges to fresh weekly highs above 0.71 ahead of inflation data

• A strong rebound in Wall Street help risk-sensitive currencies gather strength.
• US Dollar Index clings to modest gains, fails to break above 97.
• Coming up: Inflation report and private sector credit data from Australia.

The AUD/USD took advantage of the housing data in the early Asian session and started the day on a strong note. Although it looked like the pair was struggling to break above 0.71, an improved sentiment and a relatively weaker greenback in the NA session provided an additional boost to the pair and lifted it to a fresh weekly high of 0.7120. As of writing, the pair was up 0.85% on the day at 0.7117.

Earlier today,  the Australian Bureau of Statistics reported that building permits increased by 3.3% on a monthly basis in September following August’s 8.1% decline and surpassed the analysts’ estimate of 3%.  

On the other hand, after facing resistance near the 97 mark, the US Dollar Index started to consolidate its daily gains and was last seen up 0.15%on the day at 96.82 to help the pair extends its rally. Furthermore, the positive mood in the session with all three major indexes in the United States adding more than 1% is ramping up the demand for risk-sensitive currencies such as the AUD.

On Tuesday, the Reserve Bank of Australia will publish its Private Sector Credit data. More importantly,    the Australian Bureau of Statistics will release the CPI figures, which is expected to ease to 1.9% in the third quarter from 2.1%. A softer-than-expected inflation growth in Australia could put the AUD under bearish pressure as it would allow the RBA to continue to stay dovish.

Technical levels to consider

The next target for the pair on the upside is located at 0.7150 (50-DMA) ahead of 0.7200 (psychological level/Oct. 3 high) and 0.7240 (Oct. 2 high). On the other hand, supports could be seen at 0.7100 (20-DMA), 0.7045 (Oct. 29 low) and 0.7000 (psychological level).