AUD/USD holds comfortably above 0.6400 mark as traders await FOMC decision

• AUD/USD attracts fresh buying on Wednesday amid a modest USD weakness.
• Expectations for a less hawkish continue to exert pressure on the greenback.
• The downside seems limited as traders keenly await the crucial FOMC decision.

The AUD/USD pair regains some positive traction on Wednesday and maintains its bid tone through the first half of the European session. The pair is currently placed near the top end of its daily trading range, around the 0.6425-0.6430 region, and remains at the mercy of the US dollar price dynamics.

Speculations that the Federal Reserve will soften its hawkish stance amid signs of a slowdown in the US economy keep the USD bulls on the defensive. The Australian dollar, meanwhile, is underpinned by the fact that the Reserve Bank of Australia vowed to keep raising interest rates to contain stubbornly high inflation, trending at 32-year highs. The combination of said factors acts as a tailwind for the AUD/USD pair, though the intraday uptick lacks bullish conviction.

Traders seem reluctant to place aggressive directional bets ahead of the key central bank event risk - the highly-anticipated FOMC policy decision - scheduled to be announced later this Wednesday. The US central bank is widely anticipated to raise rates by 75 bp for the fourth straight time. Investors, however, will look to the accompanying policy statement and Fed Chair Jerome Powell's remarks at the post-meeting presser for clues about the future rate hike path.

In the meantime, worries about the potential economic headwinds stemming from China's strict zero-COVID policy - amid the resurgence of new cases - might cap the upside for the AUD/USD pair. Furthermore, the US ADP report on private-sector employment might also do little to provide any impetus, warranting some caution for bullish traders. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move.

Technical levels to watch