- AUD/USD regains some positive traction on Tuesday amid a modest USD weakness.
- A positive risk tone and softer US bond yields keep the USD bulls on the defensive.
- Traders now look to the US CPI for a fresh impetus ahead of the key FOMC meeting.
The AUD/USD pair attracts fresh buying near the 0.6740-0.6735 region on Tuesday and reverses a major part of the previous day’s retracement slide. The pair maintains its bid tone heading into the North American session and is currently placed near the daily peak, around the 0.6780 area.
A combination of factors prompts some selling around the US Dollar, which, in turn, is seen offering support to the AUD/USD pair. Against the backdrop of the uncertainty over the Fed’s rate hike path, a softer tone surrounding the US Treasury bond yields keeps the USD bulls on the defensive. Moreover, the easing of COVID-19 curbs in China remains supportive of a generally positive risk tone, which further undermines the safe-haven buck and benefits the risk-sensitive Aussie.
That said, growing worries about a deeper global economic downturn should keep a lid on the risk-on rally in the markets. Traders might also refrain from placing aggressive directional bets ahead of the crucial US consumer inflation figures, due for release a while from now. The data will influence the USD price dynamics ahead of the highly-anticipated FOMC policy decision on Wednesday. This, in turn, will determine the next leg of a directional move for the AUD/USD pair.
Heading into the key data/event risks, the fundamental backdrop warrants some caution for bulls and before positioning for any further intraday appreciating move for the AUD/USD pair. Hence, any subsequent move up is more likely to confront stiff resistance near the 0.6800 mark. That said, some follow-through buying has the potential to lift spot prices back towards the monthly swing high, around the 0.6850 region touched last week.