AUD/USD sticks to gains above mid-0.6600s amid softer USD, ahead of FOMC minutes

• AUD/USD gains some follow-through traction on Wednesday amid the prevalent USD selling bias.
• Bets for less aggressive Fed rate hikes and stability in the equity markets weigh on the greenback.
• Investors now look to the US macro data for some impetus ahead of the FOMC meeting minutes.

The AUD/USD pair attracts some buying near the 0.6630 area on Wednesday and climbs to a two-day high during the early European session, albeit lacks follow-through. The pair is currently placed just above the 0.6650 level and remains well supported by modest US Dollar weakness.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, is seen extending its pullback from over a one-week high and losing ground for the second straight day. Growing acceptance that the Federal Reserve will slow the pace of its policy-tightening cycle turns out to be a key factor that continues to weigh on the greenback. Apart from this, stability in the equity markets further undermines the safe-haven buck and benefits the risk-sensitive Aussie.

That said, concerns about the potential economic headwinds stemming from a spike in new COVID-19 cases in China and the imposition of fresh lockdowns keep a lid on the optimism. Furthermore, the recent hawkish remarks by several Fed officials suggest that the US central bank might continue to raise borrowing costs to tame inflation. This, in turn, should limit any deeper losses for the buck and cap the upside for the AUD/USD pair. Traders might also refrain from placing aggressive bets and prefer to wait for a fresh catalyst from the release of the November FOMC meeting minutes.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the pullback from over a two-month high touched last week has run its course and positioning for any further gains. Heading into the key event risk, traders on Wednesday might take cues from the US macro data - Durable Goods Orders and the usual Weekly Initial Jobless Claims. This, along with the broader risk sentiment, will influence the USD demand and provide some impetus to the AUD/USD pair.

Technical levels to watch