AUD/USD leaps towards channel resistance on soft US CPI

• AUD/USD jumps as risk appetite soars on softer than-expected US Consumer Price Index. 
• AUD/USD bulls 0.7000 for the days/weeks ahead as Fed pivot is priced in further. 

Risk appetite has been supported on the back of the US Consumer Price Index coming in softer than expected, fuelling the prospects of a pivot at the Federal Reserve. AUD/USD has subsequently got a boost from a weaker US Dollar that is tumbling on Wall Street as US equities soar. 

AUD/USD is currently 1.7% higher, breaking prior bull cycle highs near 0.6844 and has printed a fresh high of 0.6877 so far on the day. following the data that arrived as follows: 

US CPI below expectations 

• US CPI MoM Nov: 0.1% (est 0.3%, prev 0.4%).
• US CPI Ex Food And Energy M/M Nov: 0.2% (est 0.3%, prev 0.3%).
• US CPI YoY Nov: 7.1% (est 7.3%, prev 7.7%).
• US CPI Ex Food And Energy Y/Y Nov: 6.0% (est 6.1%, prev 6.3%).

As a consequence of the Consumer Price Index, the terminal Fed rate is now down to 4.86% vs 4.98% prior to the report. US stocks on Wall Street are considerably higher with the NAS100 already trading around 500 points up on the day before the cash open.

As a consequence of the Consumer Price Index, the terminal Fed rate is now down to 4.86% vs 4.98% prior to the report which is weighing heavily on the US Dollar and US Treasury yields. DXY, an index that measures the US dollar vs. a basket of currencies fell to a low of 103.697 having been as high as 105.095 on the day. The Australian Dollar is highly correlated to US stocks and is riding the positive sentiment into the daily channel resistance as illustrated in the following technical analysis:

AUD/USD technical analysis

AUD/USD is carving out a W-formation which could hamstring the rally en route towards 0.6900. Nevertheless, should 0.6850 hold up on a retest of bullish commitments, then there will be prospects of a run towards 0.7000.