AUD/USD clings to recovery gains above mid-0.6600s, eyes US CPI for fresh impetus

• AUD/USD attracts some buyers near the 100-day SMA support amid renewed USD weakness.
• A positive risk tone further benefits the Aussie and remains supportive of the intraday uptick.
• The lack of follow-through buying warrants caution for bulls ahead of the key US CPI report.

The AUD/USD pair manages to defend the 100-day Simple Moving Average (SMA) support and attracts some buyers near the 0.6645 region on Wednesday. Spot prices maintain the bid tone near the 0.6660-0.6665 area through the early European session and for now, seem to have snapped a three-day losing streak to over a three-week low touched on Tuesday.

The US Dollar (USD) struggles to capitalize on its gains registered over the past three days and retreats from the vicinity of the monthly peak amid dovish Federal Reserve (Fed) expectations. Apart from this, a positive tone around the European equity markets is seen undermining the safe-haven Greenback and benefiting the risk-sensitive Australian Dollar (AUD). This turns out to be a key factor offering some support to the AUD/USD pair, though the intraday uptick lacks bullish conviction.

Investors prefer to wait for the release of the latest US consumer inflation figures for cues about the Fed's rate-cut path, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the AUD/USD pair. Any further signs of cooling inflation would lift bets for a larger, 50 basis points rate cut by the Fed in September and weigh heavily on the buck. Meanwhile, the reaction to a stronger US CPI print is likely to be limited, suggesting more USD weakness.

The aforementioned fundamental backdrop supports prospects for a further near-term appreciating move for the AUD/USD pair amid the Reserve Bank of Australia's (RBA) hawkish stance. That said, it will still be prudent to wait for strong follow-through buying before confirming that the recent corrective pullback from a multi-month peak, around the 0.6825 region touched in August has run its course and placing aggressive bullish bets around the currency pair.