AUD/USD climbs beyond 0.6500 mark, fresh three-week high amid subdued USD demand

• A combination of factors lifts AUD/USD to a fresh three-week high on Thursday.
• Reviving bets for more aggressive rate hikes by the RBA underpins the aussie.
• Expectations for a less hawkish Fed weigh on the USD and remain supportive.

The AUD/USD pair attracts some dip-buying near the 0.6470 area on Thursday and hits a fresh three-week high heading into the European session. The pair is currently placed above the 0.6500 psychological mark and remains well supported by a combination of factors.

The Australian dollar is underpinned by reviving bets for a more aggressive policy tightening by the Reserve Bank of Australia, bolstered by Wednesday's stronger consumer inflation figures. In fact, the Australian Bureau of Statistics (ABS) reported that the headline CPI rose 1.8% in the September quarter and the annual rate accelerated to 7.3% - the highest since 1990. The US dollar, on the other hand, languishes near its lowest level since September 20 and offers additional support to the AUD/USD pair.

Market participants now expect that the deteriorating outlook for the US economy will force the Federal Reserve to slow the pace of its rate-hiking cycle. This is reinforced by the recent sharp pullback in the US Treasury bond yields and continues to weigh on the greenback. Apart from this, the risk-on impulse further dents demand for the safe-haven buck and benefit the risk-sensitive aussie. This, in turn, provides an additional lift to the AUD/USD pair, though the uptick lacks bullish conviction.

Traders now seem reluctant and might prefer to move to the sidelines ahead of the Advance US Q3 GDP report, due for release later during the early North American session. Thursday's US economic docket also features the release of Durable Goods Orders and the usual Weekly Initial Jobless Claims. This, along with the US bond yields, will influence the USD and provide some impetus to the AUD/USD pair. Apart from this, the broader risk sentiment might contribute to producing trading opportunities.

Technical levels to watch