AUD/USD surrenders a major part of intraday gains to over two-week high, back below 0.6700

• AUD/USD struggles to capitalize on its intraday positive move to a nearly three-week high.
• Bulls opt to lighten their positions ahead of the release of the US consumer inflation data.
• Bets that the Fed will end its rate-hiking cycle undermine the USD and should limit losses.

The AUD/USD pair retreats over 50 pips from a nearly three-week high touched this Wednesday and slides back below the 0.6700 round-figure mark during the early European session.

In the absence of any fresh fundamental development, the intraday pullback from the 0.6740 area could be attributed to some repositioning trade ahead of the key data risk - the release of the latest US consumer inflation figures. The crucial US CPI report is due for release later during the early North American session and will play a key role in influencing the Federal Reserve's (Fed) rate-hike path. This, in turn, will drive the US Dollar (USD) demand in the near term and provide a fresh directional impetus to the AUD/USD pair.

In the meantime, speculations that the US central bank will end its current rate-hiking cycle after the widely expected lift-off in July continues to weigh on the buck. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, sinks to a two-month low as investors now seem convinced that the US central bank has limited headroom to continue tightening the monetary policy. Furthermore, signs of easing inflationary pressure could allow the Fed to soften its hawkish stance sooner rather than later.

This, in turn, leads to a further decline in the US Treasury bond yields, which, along with a generally positive risk tone, might continue to undermine the safe-haven USD and lend some support to the risk-sensitive. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the upside. That said, failure to find acceptance above a technically significant 200-day SMA warrants some caution for aggressive bullish traders and positioning for any further appreciating move, at least for the time being.

Technical levels to watch