AUD/USD steadies near 0.6960 despite upbeat Aussie NAB data, focus on US inflation

• AUD/USD bulls take a breather after posting the biggest daily gains in a week.
• Market sentiment remains cautiously optimistic ahead of the key US inflation data.
• Australia’s NAB Business Conditions, Business Confidence improved in January.
• US Dollar pullback ahead of US CPI joins hope of upbeat Aussie job numbers, hawkish RBA talks to favor pair buyers.

AUD/USD seesaws around 0.6970-60 as it lacks upside momentum amid cautious markets during the early hours of all-important Tuesday. While portraying the pre-data anxiety, the Aussie pair fails to cheer the upbeat prints of the National Australia Bank’s (NAB) monthly sentiment data.

Australia’s NAB Business Confidence rose to 6.0 in January, from -1.0 prior and 1.0 expected while the NAB Business Conditions rallied to 18.0 compared to 8.0 expected and 12.0 prior. It’s worth noting that Australia’s Westpac Consumer Confidence, flashed earlier in Asia, dropped to -6.9% for February versus 5.0% prior.

It’s worth noting, however, that the US Dollar’s positioning for the Consumer Price Index (CPI) for January and softer Treasury bond yields join firmer equities to put a floor under the AUD/USD prices. Alternatively, hawkish Fed talks and the market’s doubts over the Reserve Bank of Australia’s (RBA) hawkish concerns seem to cap the Aussie pair’s run-up ahead of all-important US inflation numbers.

On Monday, Fed Governor Michelle Bowman said that the Federal Reserve will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down to the central bank's target rate, per Reuters. Before him, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and exerted downside pressure on the US Dollar.

At home, the RBA appeared hawkish but the quarterly statement from the Aussie statement raise doubts on the more rate lifts as it downplays inflation forecasts, which in turn challenged the AUD/USD bulls.

Elsewhere, S&P 500 Futures print mild gains while Australia’s ASX 200 rises 0.35% on a day by the press time, which in turn follows Wall Street’s gains and favors the AUD/USD bulls.

Looking ahead, AUD/USD traders should pay attention to the US CPI data as the recent Federal Reserve (Fed) comments appear light when suggesting more rate hikes. Also, the Fed policy pivot talks aren’t far from the table and hence any disappointment from the US inflation numbers won’t hesitate to propel the Aussie pair further toward the north.

Technical analysis

A clear upside break of the eight-day-old descending resistance line, now support around 0.6920, keeps AUD/USD buyers hopeful as they approach the 21-DMA hurdle surrounding the 0.7000 psychological magnet.