AUD/USD clings to strong intraday gains, flirts with daily high around 0.6770-75 zone

• AUD/USD gains strong positive traction on hopes for more stimulus from China.
• The risk-positive tone drives USD selling and benefits the risk-sensitive AUD.
• Traders await US macro data ahead of Australian CPI on Wednesday.
• Attention remains focused on the outcome of the highly anticipated FOMC policy meeting.

He AUD/USD it attracts new buying near the 200-day SMA for the second day in a row on Tuesday and extends its steady intraday rise during the European session. The pair has reached a new daily high, around the region of 0.6775 in the last hour and gets support from a combination of factors.

Investors welcomed China’s pledge to increase support for its fragile economy, which is evidenced by a positive risk tone around the stock markets and benefits the risk-sensitive Australian dollar (AUD). In fact, the state news agency Xinhua quoted the Politburo – the highest decision-making body of the ruling Communist Party – stating that China will intensify economic policy adjustments, focusing on expanding domestic demand, boosting confidence and preventing risks. This comes after China’s top economic planner, the National Development and Reform Commission (NDRC), unveiled measures on Monday to stimulate private investment in infrastructure and strengthen financing for private projects.

This optimism continues to boost investor confidence and prompts some selling around the US dollar (USD) from the safe haven, which in turn is considered another factor that acts as a tailwind for the AUD/USD pair. The DXY Dollar Index, which measures the strength of the dollar against a basket of currencies, corrects from two-week highs and appears to have halted a one-week recovery trend from its lowest since April 2022 for now. the possibility of the dollar continuing to fall seems limited, as traders may refrain from entering aggressive positions and would rather wait for the future path of rate hikes from the Federal Reserve (Fed). Therefore, attention remains focused on the outcome of the highly anticipated two-day FOMC policy meeting.

The US central bank is scheduled to announce its decision on Wednesday. markets have been ruling out the possibility of further rate hikes after the widely anticipated 25 basis point hike in July. However, investors are skeptical that the Fed will take a more dovish stance, so they will be scrutinizing the monetary policy statement and Fed Chairman Jerome Powell’s remarks at the post-meeting press conference. The outlook will play a key role in influencing the short-term price dynamics of the dollar. Therefore, it is prudent to wait for some continuation buying before confirming that the AUD/USD slide rejection from the 0.6900 level is over.

Market participants now expect US macroeconomic data – the Conference Board’s Consumer Confidence Index and the Richmond Fed’s Manufacturing Index – to generate some momentum later in the American session. Apart from this, the broader risk sentiment could produce short-term trading opportunities around the AUD/USD pair ahead of the Australian Consumer Inflation numbers due to be released during the Asian session on Wednesday. Also on this week’s US economic calendar will be the US GDP advance and the core PCE price index (the Fed’s preferred indicator of inflation), which will help instill volatility in the markets and boost the pair.

AUD/USD technical levels to watch