AUD/USD rebounds above 0.7750 on renewed USD weakness

• AUD/USD gained traction in the early American session.
• US Dollar Index edges lower ahead of FOMC Chairman Powell's speech.
• Core CPI in US declined to 1.4% on a yearly basis in January.

After retreating to 0.7220 area during the European trading hour, the AUD/USD pair turned north in the early American session and was last seen gaining 0.15% on a daily basis at 0.7750.

DXY pushes lower after US inflation report 

The selling pressure surrounding the USD seems to be fueling AUD/USD's upside. The data published by the US Bureau of Labor Statistics revealed on Wednesday that the Core Consumer Price Index (CPI) in January fell to 1.4% from 1.6% and missed the market expectation of 1.5%.

Commenting on the CPI data, "it isn’t a huge surprise that the recent virus-induced weakness in activity and employment appears to be weighing on inflation," said Capital Economics analysts. "With virus cases now falling sharply and states starting to ease restrictions on activity, that weakness is unlikely to last for long."

The initial market reaction to soft inflation data, which is likely to allow the Fed to preserve its dovish stance, triggered a USD selloff and the US Dollar Index is currently losing 0.15% at 90.30. Later in the session, FOMC Chairman Jerome Powell's remarks on the economy and the policy outlook will be watched closely by the market participants. 

On Thursday, the HIA New Home Sales and Consumer Inflation Expectations will be featured in the Australian economic docket.

Earlier in the day, the monthly report released by Westpac showed that the Consumer Confidence Index in Australia improved to +1.9% in February from -4.5% in January.

Technical levels to watch for