AUD/USD refreshes multi-week tops, just below mid-0.7400s

• AUD/USD caught some fresh bids on Tuesday amid a broad-based USD weakness.
• Monday’s disappointing US data, Retreating US bond yields undermined the USD.
• A softer risk tone might cap any meaningful upside for the perceived riskier aussie.

The emergence of fresh selling around the USD pushed the AUD/USD pair to near six-week tops, closer to mid-0.7400s during the Asian session.

Following the previous day's two-way price moves, the AUD/USD pair caught some fresh bids on Tuesday and now seems all set to prolong a near three-week-old bullish trajectory. The US dollar was pressured by retreating US Treasury bond yields and the overnight data, showing that US Industrial Production fell by the most in seven months in September. This, in turn, was seen as a key factor that provided a goodish lift to the major.

This comes on the back of the recent widespread rally in commodity prices, which was seen as another factor that continued underpinning the resources-linked Australian dollar. That said, a combination of factors might hold bullish traders from placing aggressive bets and keep a lid on any runaway rally for the AUD/USD pair. A softer risk tone might act as a headwind for the perceived riskier aussie amid hawkish Fed expectations.

Fears that a faster-than-expected rise in inflation could derail the global economic recovery weighed on investors' sentiment. The concerns were further fueled by Monday's disappointing Chinese data, showing that the economic growth decelerated sharply from 7.9% to 4.9% during the third quarter. Moreover, growing acceptance for an early policy tightening by the Fed could help limit the USD losses and cap the AUD/USD pair.

The FOMC meeting minutes released last Wednesday reaffirmed that the Fed remains on track to begin rolling back its massive pandemic-era stimulus by the end of this year. The markets might have also started pricing in the possibility of an interest rate hike in 2022 to counter growing inflation risks. Nevertheless, the AUD/USD pair still seems poised to retest September monthly swing highs, around the 0.7475-80 region.

In the absence of any major market-moving economic releases from the US, trades on Tuesday will take cues from a scheduled speech by Fed Governor Michelle Bowman. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and produce some trading opportunities around the AUD/USD pair.

Technical levels to watch