AUD/USD sticks to intraday gains near 0.6700 mark amid broad-based USD weakness

• AUD/USD regains positive traction on Tuesday amid the emergence of fresh USD selling.
• Bets for less aggressive Fed rate hikes, a recovery in the risk sentiment weighs on the buck.
• China’s COVID-19 woes should cap optimistic moves and act as a headwind for the Aussie.

The AUD/USD pair attracts some dip-buying near the 0.6640 region on Tuesday and maintains its bid tone through the early European session. The intraday positive move lifts spot prices back above the 0.6700 mark and is supported by the emergence of fresh US Dollar selling.

A combination of factors fails to assist the greenback to capitalize on the overnight goodish rebound from the very important 200-day SMA and offers some support to the AUD/USD pair. A dovish assessment of the November FOMC meeting minutes released last week cemented market bets for a relatively smaller 50 bps rate hike in December. This, along with a slight recovery in the global risk sentiment, undermines the safe-haven USD and benefits the risk-sensitive Aussie.

That said, the worsening COVID-19 situation in China, should keep a lid on any optimistic move in the markets and act as a headwind for the China-proxy Australian Dollar. In fact, China reported another record-high number of COVID-19 infections on Monday and the imposition of new restrictions prompted a wave of protests in several cities. This adds to worries about a further slowdown in economic activity and might continue to weigh on the market sentiment.

Furthermore, the overnight hawkish comments by influential FOMC members should help limit the downside for the buck and further contribute to capping the upside for the AUD/USD pair. It is worth recalling that St. Louis Fed President James Bullard, New York Fed President John Williams and Fed Vice Chair Lael Brainard reiterated that more rate hikes are coming. This, in turn, warrants some caution for aggressive bullish traders and positioning for further gains.

Nevertheless, the AUD/USD pair, for now, seems to have snapped a two-day losing streak and remains at the mercy of the USD price dynamics. Market participants now look to the release of the Conference Board's US Consumer Confidence Index for some impetus later during the early North American session. The focus, however, will remain on Fed Chair Jerome Powell's speech on Wednesday and this week's important US economic data, including the NFP report on Friday.

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