AUD/USD recovers further from multi-week low, moves back above mid-0.7400s post-US CPI

• AUD/USD staged a goodish rebound from the multi-week low touched earlier this Tuesday.
• Rising commodities turned out to be a key factor that benefitted the resources-linked aussie.
• The intraday uptick got an additional lift following the mixed release of the US CPI report.

The AUD/USD pair built on its intraday recovery move through the early North American session and shot to a fresh daily high, above mid-0.7400s post-US CPI report.

Having shown some resilience below the 0.7400 mark, the AUD/USD pair staged a goodish recovery from the three-week low touched earlier this Tuesday and snapped a four-day losing streak. The prospects for more sanctions on Russia pushed commodity prices higher, which turned out to be a key factor that benefitted the resources-linked Australian dollar.

On the other hand, the US dollar eased a bit from the highest level since May 2020 following the mixed release of the US consumer inflation figures. In fact, the headline CPI accelerated to 8.4% YoY in March from the 7.9% previous. This, however, was negated by a slight disappointment from the core reading, which rose to 6.5% as against 6.6% expected.

Nevertheless, the data reinforced market bets for a more aggressive policy tightening by the Fed and a 50 bps rate hike at the next two policy meetings. This, along with concerns that the recent surge in commodity prices will put upward pressure on the already high inflation, should act as a tailwind for the US Treasury bond yields and the buck.

The fundamental backdrop seems tilted firmly in favour of the USD bulls, warranting some caution for aggressive traders. Hence, it will be prudent to wait for strong follow-through buying before confirming that the AUD/USD pair has formed a temporary bottom near the 0.7400 round figure and positioning for any meaningful upside.

Technical levels to watch