AUD/USD trades with modest losses below mid-0.6600s as USD rebounds from multi-month low

• AUD/USD attracts some sellers following an intraday uptick to over a one-month peak.
• A softer risk tone drives some haven flows towards the USD and exerts some pressure.
• Traders look to FOMC minutes for a fresh impetus ahead of Powell’s speech on Friday.

The AUD/USD pair retreats after touching over a one-month high, around the 0.6750-0.6755 region earlier this Wednesday and remains depressed through the first half of the European session. Spot prices currently trade around the 0.6730-0.6735 region, down 0.15% for the day, and for now, seem to have snapped a three-day winning amid a modest US Dollar (USD) strength.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, recovers from its lowest level since January amid some repositioning trade ahead of the July FOMC meeting minutes, due for release later during the US session. Apart from this, a slight deterioration in the global risk sentiment turns out to be another factor benefiting the safe-haven buck and driving flows away from the perceived riskier Australian Dollar (AUD).

The downside for the AUD/USD pair, meanwhile, seems limited amid the Reserve Bank of Australia's (RBA) hawkish stance. In fact, the central bank had signaled that it would not hesitate to hike rates in the face of more upside risks to inflation. This, along with increasing chatters regarding big economic stimulus measures from China's government, could act as a tailwind for the China-proxy Aussie and lend some support to the currency pair.

Furthermore, growing acceptance that the Federal Reserve (Fed) will start its policy easing cycle and announce a 25 basis points (bps) rate cut in September should cap gains for the USD. Traders might also prefer to wait for Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday for cues about the central bank's policy path. This, in turn, warrants some caution before confirming that the AUD/USD pair has topped out in the near term.

Even from a technical perspective, last week's breakout through the 0.6600 confluence hurdle – comprising the very important 200-day and the 100-day Simple Moving Averages (SMA) – favors bullish traders. Hence, any subsequent corrective decline could still be seen as a buying opportunity and is more likely to be limited.