• AUD/USD is aiming to kiss the psychological resistance of 0.7000 amid a decline in US CPI data.
• Lower gasoline and used car prices have softened the United States price index.
• Rising Australian inflation might compel the RBA to sound hawkish in its February monetary policy meeting.

The AUD/USD pair is struggling to extend its upside journey above the critical resistance of 0.6980 in the Asian session. The Aussie asset is expected to surpass the 0.6980 hurdle amid the risk appetite theme and may recapture the psychological resistance of 0.7000 ahead.

S&P500 ended on a positive note and recorded three consecutive bullish trading sessions on hopes of further deceleration in the pace of interest rate hikes by the Federal Reserve (Fed) after softening of United States Consumer Price Index (CPI) data. The 10-year US Treasury yields weighed down heavily to near 3.4% as US inflation trimmed in line with expectations.

The US Dollar Index (DXY) renewed its seven-month low at 102.86 as lower US inflation claims that the Fed is in the right direction and effectively fighting against stubborn inflation. Thanks to the lower gasoline prices and prices of used cars, which led to a meaningful fall in the price index. It is highly likely that the Fed will now consider further hiking will smaller rates, which might also provide a cushion to the slowdown in economic activities.

On the Aussie front, rising inflation is still causing worry for the Reserve Bank of Australia (RBA). Monthly inflation (Nov) climbed to 7.3% and retail demand has remained strong, which might force RBA Governor Philip Lowe to sound hawkish in its upcoming monetary policy scheduled in February.

Meanwhile, the recovery in Chinese economic growth after the reopening of the economy is providing strength to the Australian Dollar. It is worth noting that Australia is a leading trading partner of China and a recovery in Chinese economic prospects will also support the Australian Dollar.