AUD/USD erases daily gains after US CPI, drops toward 0.6550

• US CPI inflation in line with expectation, US Dollar drops then recovers sharply.
• US Dollar Index holds in negative territory for the day.
• The AUD/USD pair faces resistance at 0.6630 and has a key support at 0.6550.

The AUD/USD spiked to 0.6612 following the release of the US inflation data, but it then fell to its daily low near 0.6550. The pair is now hovering around 0.6570 as markets digest the data ahead of Wednesday's FOMC decision.

USD down then up, after US CPI data

Inflation in the US cooled as anticipated in November, as measured by the Consumer Price Index (CPI). The CPI rose 0.1% during the month, and the annual rate slowed from 3.2% in October to 3.1% in November. The core annual reading remained steady at 4%.

The US Dollar initially hit fresh daily lows with this news, but then rebounded sharply. The DXY is currently down 0.30% for the day, trading around 103.80. Market participants continue to digest the CPI figures. On Wednesday, the Producer Price Index (PPI) is due to be released, and later, the Federal Reserve will announce its decision on monetary policy and provide new economic projections.

The AUD/USD is trading near Monday's close, around 0.6570, after finding support above Asian session lows and the 0.6555 area. The pair continues to move sideways, limited on the upside by 0.6630 and with a strong support area at 0.6550.

Technical levels