AUD/USD at daily highs, below 0.6800 ahead of crucial US CPI report.

• AUD/USD regains some positive traction on Tuesday amid modest USD weakness.
• The positive risk tone and lower US bond yields keep USD bulls on the back foot.
• The US CPI will be the key indicator ahead of the FOMC meeting.

The pair AUD/USD it attracts new buying near the 0.6740-0.6735 zone on Tuesday and reverses much of the previous day’s decline. The pair maintains its buying tone ahead of the American session and is currently at daily highs, around the 0.6780 zone.

A combination of factors causes some selling around the US dollar, which in turn provides support for the AUD/USD pair. Against the background of uncertainty about the Fed’s rate hike path, a softer tone around US Treasury yields. keeps USD bulls on the back foot. Also, easing of COVID-19 restrictions in China continues to support positive risk sentiment, further weakening the safe-haven US dollar, and benefiting the risk-sensitive Aussie.

That being said, the growing concern about a deeper global economic recession should curb risk appetite in the markets. Traders could also refrain from entering aggressive directional positions ahead of the crucial numbers on the US CPI Consumer Inflation, which will be published in a while. The data will influence dollar price dynamics ahead of Wednesday’s expected FOMC policy decision. This, in turn, will determine the next directional move for the AUD/USD pair.

Ahead of the key data/events, the fundamental background warrants some caution on the part of bulls and before positioning for any further intraday appreciation move for AUD/USD. Therefore, any further move higher is likely to be met with stiff resistance near the 0.6800 level. That being said, some continuation buying has the potential to lift the pair back towards the monthly high, around the 0.6850 region touched last week.

AUD/USD technical levels