• AUD/USD is on an upside stance, exploring new peaks since last year (August).
• Meanwhile, optimistic MADC signals support buyers.
• Almost overbought Relative Strength Index and many obstacles challenge immediate upsides.

AU-USD bulls celebrate the massive Aussie inflation stats, with the quote renewing 5-month highs near 0.7115 early Wednesday. Alongside Australia’s upbeat quarterly CPI (Consumer Price Index) and RBA’s Trimmed Mean Consumer Price Index, the pair’s successful cross of the ascending trendline from 15 November, near 0.7095, also support bullish tendencies.

Remember, bullish Moving Average Convergence Divergence signals back the upward move. Nevertheless, a horizontal region incorporating several zones market since June last year, near 0.7130 – 40 limits, seems a sturdy hurdle for AUD-USD traders. RSI’s overbought situations add strength to the highlighted obstacle.

Should the pair steady above 0.7140, the probability of seeing AUD-USD’s upside toward mid-last year high around 0.7285 would materialize. Otherwise, intraday sellers might take entries if AUD-USD’s price dips beneath the resistance-switched-support level at the 0.7095 area.

Nonetheless, the previous weekly peak at around 0.7065 and the 0.6870 low last Thursday could test AUD-USD bears. Market players should beware that the 0.618 FIB retracement mark of AUD-USD’s June-October dip of the past year and the 200 DMA, near 0.6855 & 0.6815, respectively, remain the final defense and clearing the territory could authorize a bearish trend.

How to Trade AUD-USD?

AUD-USD may secure a short-term foothold amidst increasing price pressures. Previous reports from the Reserve Bank of Australia had the central bank predicting an 8% CPI later in 2023 before easing in 2024. Today’s stats are close to the forecast, and entrenched inflation would put the central bank in a tricky spot. Meanwhile, the local press capitalized on the ‘mortgage cliff.’

That refers to borrowers who took fixed-rate loans more than two years ago when the cash rate stood at 0.10%. Most of these loans will begin to roll over soon (later in 2023). The current 3.10% cash rate might stretch the balance sheets of households, and continued hikes will likely stress them further.

Early today, New Zealand’s CPI came stable at 7.2% Y.Y to December end, similar to previous readings, though beyond the 7.1% estimate. Meanwhile, the QoQ (quarter-on-quarter) figure read 1.4% against the 1.3% estimate, though a decline from the 2.2% prior print. Meantime, AUD/NZD climbed beyond 1.0850 following last month’s 12-month lows of 1.0468.

AUD-USD Technical Analysis

AUD-USD hit five-month highs today near 0.7092 and stays within an ascending channel. The price sways beyond all long, medium, and short-term daily SMAs. The 10, 21, 55, and 100day Simple Moving Averages exhibit positive gradients, whereas the 200 and 260day Simple Moving Averages are yet to revive.

That could mean that medium and short-term bullish impetus is materializing, but longer-term momentum hasn’t acknowledged that. Support could stand at the last lows near 0.6872 and 0.6860 or dip at the ascending trendline, which presently divides with the 55-day Simple Moving Average at 0.6788. upsides could see resistance at the previous highs of 0.7137 & 0.7283.

What Triggered AUD’s Upside

The Australian Dollar climbed to five-month highs following the 7.8% headline CPI, which beat the 7.6% estimate Y/Y to December end against the prior 7.3%. That welcomed highs never recorded since the early 90s. Meanwhile, the December QoQ headline CPI came at 1.9% instead of the anticipated 1.6% and the prior 1.8%.