AUD/USD clings to recovery gains above mid-0.6600s, US CPI expected to see further boost

• AUD/USD draws some buyers near 100-day SMA support amid renewed USD weakness.
• A positive risk tone continues to benefit the Aussie and remains bullish on the day.
• Continued lack of buying warrants caution for bulls ahead of key US CPI report.

AUD/USD manages to defend the 100-day Simple Moving Average (SMA) support and attracts some buyers near the 0.6645 region on Wednesday. Spot prices are holding a bid tone near the 0.6660-0.6665 zone until the start of the European session and for now appear to have broken a three-day losing streak to a three-week low hit on Tuesday.

The US dollar (USD) is struggling to capitalize on its gains over the past three days and is retreating from the vicinity of the monthly peak amid favorable Federal Reserve (Fed) expectations. Apart from this, there is positive tone around European equity markets undermining the safe-haven Greenback and benefiting the risk-sensitive Australian Dollar (AUD). This is proving to be a key factor providing some support for the AUD/USD pair, although the intraday rally lacks bullish conviction.

Investors prefer to wait for the release of the latest US consumer inflation figures for clues on the Fed’s rate cut trajectory, which will play a key role in influencing USD price dynamics and provide further directional impetus to the AUD/USD pair . Any further signs of cooling inflation would raise bets for a bigger 50 basis point interest rate cut by the Fed in September and hurt the dollar heavily. Meanwhile, the reaction to a stronger US CPI print is likely to be limited, suggesting more USD weakness.

The fundamental backdrop mentioned above supports the prospects for a new short-term appreciation move in the AUD/USD pair, amid the hawkish stance of the Reserve Bank of Australia (RBA). That said, it will still be prudent to wait for continued buying before confirming that the recent corrective pullback from a multi-month peak around the 0.6825 region reached in August has run its course and placed aggressive bets bullish around the currency pair. .