AUD/USD trims CPI-led strong gains

The AUD/USD pair trimmed upbeat Australian CPI-led gains beyond 0.7700 handle and has now retraced nearly 50-pips from session peak.

Currently trading around 0.7670-75 region, the pair seems to have digested stronger-than-expected Australian CPI print for the third quarter of 2016, dampened expectations of an immediate monetary easing by RBA. 

Meanwhile, the greenback, as measured by the overall US Dollar Index, has managed to bounce of lows following an unexpected shrinkage in the US goods trade deficit. The US Census Bureau report released on Wednesday showed international trade deficit fell to $56.1 billion in September, down $3.1 billion, or 5.2%, from $59.1 billion in August, and was above market expectations of a $60.6 billion deficit. 

Next on tap from the US economic docket would be the release of flash services PMI and new home sales data. Market focus, however, would remain on this week's advance Q3 US GDP print on Friday, which if comes-in better-than-expected would reaffirm market expectations of an eventual Fed rate hike action in December and trigger a fresh leg of bullish momentum for the greenback.

Technical levels to watch

From current levels, 0.7660 level is likely to act as immediate support, which if broken is likely to accelerate the slide towards 0.7630 intermediate support before the pair eventually heads back towards 0.7600 handle.

On the upside, 0.7700-10 area now becomes immediate resistance above which a fresh bout of short-covering should lift the pair beyond 0.7725 monthly high resistance, towards testing its next major hurdle near 0.7750 area.