• US annual CPI slowed to 3%, the lowest reading since March 2021.
• US Dollar tumbled across the board after the release of the US inflation data.
• AUD/USD  hit its highest level in almost three weeks, reaching 0.6752.

After the release of the US consumer inflation data, which came in below expectations, the AUD/USD pair surged from 0.6685 to 0.6752, reaching its highest level since June 23. The pair remains near the highs as markets digest the new data.

Inflation continues to slow in the US 

The US Consumer Price Index (CPI) increased 0.2% in June, below the expected 0.3%. The annual rate fell from 4% to 3%, which is below the market consensus of 3.1%, and the lowest since March 2021. The annual Core rate also fell from 5.3% in May to 4.8% in June, which is below the estimated 5%.

As a result of the lower-than-expected US CPI figures, markets have priced in lower odds of a second rate hike from the Fed this year. However, a rate hike in the July meeting is almost fully priced in.

Following the release of the US CPI figures, US Treasury yields tumbled, with the US 10-year dropping from 3.95% to 3.88%, and the 2-year from 4.84% to 4.73%. The US Dollar Index (DXY) also fell to test June lows, trading near 101.00. Wall Street futures rose, and commodity prices jumped. The current context favors the upside in AUD/USD, with increased risk appetite and lower US yields. 

The 0.6750 area represents immediate resistance for the pair, and consolidation above it could open the doors to more gains. The next resistance stands at 0.6765, followed by a strong barrier at 0.6800. The 0.6700/05 area is the immediate support and while above, risks are tilted towards the upside.

Technical levels