• AUDUSD builds on the post-US CPI rally and climbs to its highest level since September 21.
• A slightly overbought RSI on hourly charts could hold back bulls from placing aggressive bets.
• A sustained break below the mid-0.6500s horizontal support will negate the positive outlook.

The AUDUSD pair builds on the overnight softer US CPI-inspired blowout rally and gains traction for the second successive day on Friday. The pair sticks to its intraday gains through the early North American session and is currently placed near the 0.6670-0.6680 region, or the highest level since September 21.

Firming expectations that the Federal Reserve will slow the pace of its policy tightening amid signs of easing inflationary pressures drags the US Dollar to a two-and-half-month low. Adding to this, the risk-on mood is seen as another factor undermining the safe-haven buck and further benefiting the risk-sensitive Aussie. This, in turn, acts as a tailwind for the AUDUSD pair and remains supportive of the intraday positive move.

From a technical perspective, a slightly overbought RSI (14) on hourly charts suggests that any further gains are likely to remain capped near the 100-day SMA, currently around the 0.6700 round figure. This is followed by the 0.6740 barrier, representing the top end of a descending channel extending from May 2022, which should act as a pivotal point for the AUDUSD pair. A convincing breakthrough will be seen as a fresh trigger for bulls.

Spot prices might then accelerate the momentum towards reclaiming the 0.6800 round-figure mark, above which the AUDUSD pair could test the next relevant hurdle near the 0.6850-0.6855 supply zone.

On the flip side, the 0.6640-0.6635 region now seems to protect the immediate downside ahead of the 0.6600 round figure and the daily low, around the 0.6580-0.6575 area. Any further pullback is likely to attract fresh buying and remain limited near the 0.6545-0.6540 horizontal resistance breakpoint. That said, some follow-through selling will negate the near-term positive outlook and prompt some technical selling around the AUDUSD pair.

The next relevant support to the downside is pegged near the 0.6500 psychological mark, below which spot prices would turn vulnerable to test the 0.6440 support zone. The AUDUSD pair could eventually slide back to the 0.6400 mark. Some follow-through selling below the weekly low, around the 0.6385 region, will shift bias in favour of bearish traders.

AUDUSD daily chart

Key levels to watch