AUD/USD corrects to near 0.6660 as USD Index attempts recovery, US CPI hogs limelight

• AUD/USD has dropped to near 0.6660 as the USD Index has attempted a recovery.
• S&P500 futures have extended overnight gains as investors have digested uncertainty about corporate earnings.
• The Australian Dollar will remain on tenterhooks ahead of the speech from RBA Governor Philip Lowe.

The AUD/USD pair has corrected modestly to near 0.6660 in the European session. A mild sell-off in the Aussie asset has stemmed due to a recovery attempt by the US Dollar Index (DXY).

The USD Index has rebounded from 101.67 after a vertical sell-off. Minor recovery in the USD Index has propelled as investors are getting anxious ahead of the United States Consumer Price Index (CPI) data, which will release on Wednesday at 12:30 GMT.

S&P500 futures have extended overnight gains as investors have digested uncertainty about corporate earnings. The yields offered on 10-year US Treasury bonds have rebounded to near 3.98%.

The USD Index is consistently facing selling pressure for the past three trading sessions as investors are anticipating that interest rates by the Federal Reserve (Fed) will peak sooner. Economists at Commerzbank cited it would probably be too early though to write off the Dollar at this stage. The labor market report on Friday was not that bad after all. We assume that the labor market remains too tight for the liking of the Fed and that it will therefore hike its key rate once again at the end of July. It remains to be seen whether that will be the end of the rate hike cycle, and it is still uncertain how quickly rate cuts really will follow.

Meanwhile, the Australian Dollar will remain on tenterhooks ahead of the speech from Reserve Bank of Australia (RBA) Governor Philip Lowe. Investors would look for interest rate guidance from Philip Lowe as labor market conditions are getting tighter.