AUD/USD struggles to sustain above 0.6720 amid risk-off mood ahead of FOMC minutes

• AUD/USD is struggling to remain above the immediate hurdle of 0.6720 as investors await FOMC minutes.
• Higher wage inflation could be a roadblock for the Fed in achieving a 2% inflation rate.
• The Australian Dollar is failing to capitalize on better-than-projected Caixin Manufacturing PMI data.

The AUD/USD pair is facing pressure in sustaining above the immediate resistance of 0.6720 in the Asian session. The Aussie asset is expected to re-test the round-level support of 0.6700 as the risk-aversion theme is impacting the Australian Dollar.

Bearish settlement in S&P500 on Tuesday and subdued performance in the 500-United States stock basket on a broader note are highlighting caution in the sentiment of the market participants. The US Dollar Index (DXY) shifted into a bullish trajectory on Tuesday after defending the 103.00 support with sheer strength. Contrary, the demand for US government bonds improved, therefore, 10-year treasury yields dropped to 3.76%.

Appeal for the US Dollar Index has improved dramatically ahead of the release of the Federal Open Market Committee (FOMC) minutes. Investors are eagerly waiting for cues about the monetary policy outlook for CY2023.

Currently, the tight labor market and lower Unemployment Rate in the United States are acting as a major hurdle for the Federal Reserve (Fed) in achieving a 2% inflation rate. A continuation of firmer job additions in the labor market each month is attracting higher employment bills to compensate for the unavailability of labor, which might spur the retail demand ahead.

Meanwhile, the Australian Dollar is failing to capitalize on better-than-anticipated Caixin Manufacturing PMI data. The IHS Markit reported the economic data at 49.0, higher than the consensus of 48.8 but lower than the prior release of 49.4. The street was expecting a decline in the PMI numbers after observing negative cues from China’s official Manufacturing PMI data and the vulnerable status of Covid-19 in China.