AUD/USD moves little after US macro data, focus remains on FOMC Minutes

• AUD/SUD gained traction for the second day in a row amid modest USD weakness.
• Aggressive Fed expectations, upbeat US retail sales helped limit any further USD losses.
• Investors may prefer to wait on the sidelines before the FOMC Meeting Minutes.

The pair AUD/USD pulled back a few pips from the weekly high hit earlier this Wednesday and traded modest intraday gains around the 0.7165 region on the back of US macro data.

After a brief consolidation phase during the early part of trading on Wednesday, the AUD/USD pair gained some positive traction and built on the overnight rebound from the 0.7100 mark. Easing fears over the risk of Russia invading Ukraine continued to undermine the safe haven US dollar, which, in turn, was seen as a key factor benefiting the perceived riskier Australian dollar.

That said, increased bets on a 50bp Fed rate hike in March acted as a tailwind for the dollar, drawing further support from US economic data, in its majority optimistic. In fact, the US Census Bureau reported that monthly retail sales posted a stronger-than-expected growth of 3.8% in January. Excluding autos, underlying retail sales also beat estimates, rising 3.3% for the reported month.

A sharp improvement in consumer spending reinforced market expectations that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation. This was evident by high yields on US Treasuries, which helped limit intraday USD losses. Traders, however, refrained from making aggressive bets ahead of the FOMC meeting minutes, due later during the USD session.

Investors will be looking for new clues about the likely pace of the Fed’s tightening cycle, which will play a key role in influencing short-term USD price dynamics. Aside from this, the broader market risk sentiment should provide some lift to the AUD/USD pair and allow traders to take advantage of short-term opportunities.

Technical levels