AUD/USD spikes to over one-week high post-US CPI, struggles to capitalize on the move

• AUD/USD reverses swiftly from the daily low and rallies to over a one-week high in the last hour.
• The USD weakens despite a slightly higher-than-expected US CPI print and lends support to the pair.
• A softer risk tone helps turns out to be a key factor capping the upside for the risk-sensitive Aussie.

The AUD/USD pair rallies nearly 100 pips from the daily low touched in the last hour and spikes to over a one-week high following the release of the US consumer inflation figures. The pair is currently placed just above the 0.7000 psychological mark, though lacks any follow-through buying. 

The US Dollar witnessed a typical "buy the rumour, sell the news" kind of trade after the US Bureau of Labor Statistics reported that the headline CPI rose by 0.5% in January. The reading was in line with market expectations and was accompanied by a higher-than-expected yearly rate, which ticked down to 6.4% from the 6.5% previous. More importantly, Core CPI, which excludes food and energy prices, came in at 0.4% MoM and 5.6% YoY.

Given that a stronger print was already priced in the markets, the USD weakens across the board in the absence of any major surprise to the upside from the US CPI. This, in turn, is seen as a key factor pushing the AUD/USD pair higher. That said, a generally softer tone around the equity markets seems to benefit the Greenback's relative safe-haven status and keeps a lid on any further gains for the risk-sensitive Aussie, at least for the time being.

From a technical perspective, repeated failures to find acceptance above the 0.7000 mark suggest that the AUD/USD pair's recent pullback from its highest level since June 2020 is still far from being over. Hence, it will be prudent to wait for a strong follow-through buying before positioning for any further appreciating move.

Technical levels to watch