The Australian Dollar (AUD) extended upside movement against the US Dollar (USD) on Monday, rallying the price of AUDUSD to more than 0.7170 after leaving a hammer on daily chart despite better than expected inflation news from the United States. The technical bias remains bullish because of a Higher Low in the recent downside move.
As of this writing, the pair is being traded near 0.7166. A support may be seen around 0.7086, the channel support on daily timeframe ahead of 0.7068, the swing low of the hammer candle which was emerged on Friday. A break and daily closing below the 0.7068 support area could incite renewed selling pressure, validating a dip towards the 0.7000 support area.
On the upside, the pair is likely to face a hurdle near 0.7194-0.7200 which is the confluence of psychological number as well as channel resistance as demonstrated in our daily chart ahead of 0.7242, the swing high of the last major upside rally.
US Inflation News
Rising rents and healthcare costs lifted underlying U.S. consumer price inflation in January by the most in nearly 4-1/2 years, providing support for the view that the Federal Reserve could gradually raise interest rates this year as forecast. The Labor Department said on Friday its Consumer Price Index, excluding the volatile food and energy components, increased 0.3 percent last month, the biggest gain since August 2011, following a 0.2 percent rise in December. The core CPI was up 2.1 percent in December from the year earlier. The Fed has a 2.0 percent inflation target and monitors a price measure that is running well below the core CPI.
Considering the overall technical and fundamental outlook, buying the pair near current levels with a stop placed at the swing low of the daily hammer candle could be a good strategy in short term.