Australian Dollar turns down after US CPI and Powell's testimony

• AUD/USD declined by 0.30% to 0.6265 on Thursday.
• The pair remains confined below 0.6300 despite the USD weakness.
• US inflation data came in higher than expected but the USD trades in the red.

The Australian Dollar (AUD) extends its sideways consolidation as AUD/USD softens to around 0.6260 in Wednesday's session, falling 0.30% on the day. The pair has succumbed to selling pressure after briefly flirting with the key 0.6300 hurdle amid persistent risk-off sentiment while markets assess inflation data from the United States (US) and Federal Reserve's (Fed) Chair Jerome Powell's testimony before the US Congress.

Daily Digest Market Movers: Aussie under pressure amid US inflation and trade tension

• Recent US inflation data came in stronger than expected, with the headline US Consumer Price Index (CPI) rising 0.5% MoM (vs. a 0.3% forecast) and the core US CPI jumping 0.4% (exceeding expectations). This has reinforced the Fed's hawkish stance and bolstered the US Dollar.
• In addition, Fed Chair Jerome Powell sounded cautious during his second testimony before the US Congress.
• He reaffirmed the Fed's independence and rejected any political pressure to alter policy direction.
• He also stated that inflation progress has slowed, but the 2% target remains the central bank's priority.
• On the home front, softer Q4 Consumer Price Index (CPI) data in Australia shows headline inflation at around 2.5% YoY (down from 2.8%), with the trimmed mean CPI falling to a three-year low of 3.2%. These figures have increased market expectations of a 25 basis point RBA rate cut in February, though ongoing trade tensions with China continue to pressure the Aussie.
• Despite some recovery in commodity prices, weak business activity in China remains a drag on the AUD. The US Dollar, meanwhile, has reasserted strength due to persistent risk aversion and expectations of a tighter Fed policy, limiting further gains for the AUD/USD pair.

AUD/USD Technical Outlook: Consolidation with signs of cautious momentum

The pair has struggled to break through the key 0.6300 resistance, highlighting persistent selling pressure amid a choppy session. The Relative Strength Index (RSI) stands at 55--indicating that, despite some buyer interest, momentum is not robust. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram shows rising green bars, hinting at a gradual build in bullish momentum.

With support around 0.6200 and resistance near 0.6300, traders are closely monitoring the upcoming US economic data and RBA signals to determine the next directional move for AUD/USD.