AUD/USD - Above 0.78, ignores strong US data despite overbought conditions

• AUD/USD is bid above 0.78.
• Strong US data fail to lift greenback.
• AUD/USD charts indicate short-term overbought conditions.

AUD/USD closed above 0.78 on Friday and remains bid above the psychological level today as strong US data failed to put a bid under the greenback.

US inflation as represented by core CPI (excludes food and energy) rose 0.3% m/m and 1.8% y/y percent in December, data released on Friday showed. Meanwhile, the retail-control group sales, which are used to calculate GDP and exclude food services, auto dealers, building materials stores and gasoline stations, rose 0.3% in December following an upwardly revised 1.4% advance, which as per Bloomberg report was the largest since 2005.

The upbeat data are likely to keep the Fed on track to raise rates in March. Accordingly, the 10Y Aussie-US spread dropped slightly to 17.9 bps from 18.6 bps. Still, the USD refused to catch a bid, thus, allowing the AUD/USD pair to cheer the strength in commodities despite overbought technical conditions.

The pair could remain in the tight range as no China or Aussie data is due for release today and NY is closed.

AUD/USD Technical Levels

Reuters says positive momentum studies -  5, 10 & 20 DMAs trend north - point to a bullish setup. Friday's close above 0.7898 (Oct high) targets 0.7978, 76.4% Sep/Dec fall. It adds, " 0.7896, 38.2% NY rise & 0.7925 NY high initial support/resistance."