AUD/USD sticks to modest intraday gains amid weaker USD, remains below 0.6800

• AUD/USD gains traction for the third successive day, though lacks follow-through buying.
• Bets for less aggressive Fed rate hikes weigh on the USD .and act as a tailwind for the pair.
• The upside seems capped as traders await the key US CPI and FOMC meeting next week.

The AUD/USD pair prolongs its positive trend for the third successive day and maintains its bid tone through the mid-European session. The pair, however, remains below its highest level since September 13 touched earlier this week and is currently placed just a few pips below the 0.6800 round-figure mark.

A combination of factors drags the US Dollar back closer to over a five-month low touched earlier this week, which, in turn, is seen offering support to the AUD/USD pair. Expectations that the Fed will slow the pace of its policy tightening and deliver a relatively smaller 50 bps rate hike in December keep the US Treasury bond yields depressed. This, along with a generally positive tone around the equity markets, undermines the safe-haven greenback and benefits the risk-sensitive Aussie.

The easing of COVID-19 restrictions in China remains supportive of the recent recovery in the global risk sentiment. Furthermore, a fresh leg up in commodity prices provides an additional lift to the resources-linked Australian Dollar. That said, growing worries about a deeper global economic downturn might keep a lid on any optimistic move and act as a headwind for the AUD/USD pair. Traders might also prefer to wait on the sidelines ahead of next week's key macro data/event risks from the US.

The latest US consumer inflation figures for November will be released on Tuesday. This will be followed by the highly-anticipated FOMC monetary policy meeting on December 13-14. The outcome should influence the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair. In the meantime, traders on Friday will look to the US economic docket, featuring the Producer Price Index (PPI) and the Prelim Michigan Consumer Sentiment Index, for short-term opportunities.

Technical levels to watch