AUD/USD Holds Steady Above Mid-0.6600s, Traders Keenly Await US CPI/FOMC Minutes

The AUD/USD pair edges higher for the second successive day on Wednesday and holds steady above mid-0.6600s through the first half of the European session. Spot prices, however, lack follow-through buying or bullish conviction as traders keenly await the release of the latest US consumer inflation figures.

The crucial US CPI report, along with the FOMC minutes, will be looked upon for clues about the Federal Reserve’s (Fed) future rate hike path, which, in turn, will influence the US Dollar (USD) and provide a fresh impetus to the AUD/USD pair. In the meantime, a generally positive risk tone is seen undermining the safe-haven Greenback and lending some support to the risk-sensitive Australian Dollar amid signs of improving ties with China. It is worth recalling that Australia and China – the major commodity trade partners – reached an agreement to resolve their dispute over barley imports.

That said, the prospects for further policy tightening by the Fed put a floor under the US Treasury bond yields and limit losses for the USD. Apart from this, worries about a deeper global economic downturn benefits the Greenback’s safe-haven status and contributes to capping the AUD/USD pair. In fact, the International Monetary Fund (IMF) on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the key releases from the US, due later during the North American session.

From a technical perspective, the recent rejection slide from the very important 200-day Simple Moving Average (SMA) and a subsequent decisive break below the 0.6700 mark was seen as a fresh trigger for bearish traders. This further makes it prudent to wait for strong follow-through buying before confirming that the downward trajectory witnessed over the past week or so has run its course and positioning for any meaningful near-term appreciating move for the AUD/USD pair.

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