AUD/USD hits a five-week high around 0.6800, amidst US CPI cooling down, cementing a Fed skip

• AUD/USD gains 0.55%, trading at 0.6787 despite the US CPI data release.
• Fed is likely to delay rate hike as inflation cools; Futures suggest hike likelihood at 58.2% next month.
• Despite the ongoing RBA tightening cycle, AUD boosted by marginal gain in Consumer Confidence

AUD/USD remains trading in the green, extending its rally to four straight days, but gave back some of its earlier gains following an inflation report in the United States (US). Data released from Australia in the Asian session lifted the pair, but at the time of writing, it exchanges hands at 0.6783, up 0.55%.

Inflation slowdown gives room for Fed's pause; AUD/USD nears weekly high

The US Bureau of Labor Statistics (BLS) released May inflation figures, with the Consumer Price Index (CPI) expanding 4% YoY, below estimates of 4.1% and the prior’s month 4.9%. Excluding volatile items, the so-called core CPI stood at 5.3% YoY, aligned with estimates, though it ticked 0.2% lower than April’s data.

Therefore, as inflation cools, the Federal Reserve (Fed) can skip a rate hike in June to check the economic status before the July meeting. Money market futures estimate the Fed would raise rates 25 basis points (bps) to 5.25%-5.50% next month, as shown by the CME FedWatch Tool, with chances standing at 58.2%, higher than a week ago.

After the inflation release, the AUD/USD edged towards a five-week high of 0.6802 before making a U-turn as investors digested US data. Nevertheless, the AUD/USD has resumed its uptrend, approaching the 0.6790 area, shy of the 0.68 handle.

On the Aussie (AUD) front, Consumer Confidence for June, revealed by Westpac, printed a marginal gain of 0.2%, above estimates of 0%, but smashed May figures of -7.9%. Nevertheless, it should be said the reading remains at soft levels, with Australians hurt by the high inflationary pressures and the Reserve Bank of Australia (RBA) tightening cycle.

Must read: FOMC Preview: Banks expect the Fed to take a break, but signal higher rates ahead

Upcoming events

The US economic docket will feature the US Federal Reserve Open Market Committee (FOMC) monetary policy decision, followed by the Fed Chair Powell press conference. The Producer Price Index (PPI) for May will be revealed earlier.

AUD/USD Price Analysis: Technical outlook

The AUD/USD remains neutrally biased, slightly tilted upwards, as the 200-day Exponential Moving Averages (EMAs) sit above the spot price. However, to resume its bullish continuation, the AUD/USD must reclaim 0.6800 before testing the psychological 0.6850 before challenging the February 21 high of 0.6919. Conversely, failure at 0.6800 could pave the way for a test of the 200-day EMA at 0.6758.