AUD/USD surges through 0.78 handle, highest since April 2016

The AUD/USD pair continued scaling higher and surged through the 0.7800 handle, for the first time since April 2016, post disappointing US economic data.

Bulls tightened their grip after data released from the US showed easing inflationary pressure, with the headline CPI unchanged on a monthly basis and yearly rate sliding further below the Fed's 2.0% medium-term range. 

Adding to disappointing inflation figures, monthly retail sales data contracted for the second consecutive month and further diminished prospects for additional Fed rate hike action. The view is being reinforced by tumbling US Treasury bond yields, which was seen driving flows away from the US Dollar Index towards higher-yielding currencies - like the Aussie. 

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Meanwhile, possibilities of some big stops getting triggered on a move beyond yearly tops resistance near mid-0.7700s might have also collaborated to the pair's sharp upsurge over the past hour or so. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet writes: "From a technical point of view, the 4 hours chart shows that the upward momentum potential is firm, as technical indicators keep heading higher, despite being in overbought levels, whilst the 20 SMA turned sharply higher well below the current price. Having topped at 0.7763, the pair has scope to advance up to 0.7834 the 2016 high."