AUD/USD bounces off multi-week lows, down little ahead of US CPI

• AUD/USD trimmed a part of its intraday losses to four-week lows.
• The risk-off mood, stronger USD kept a lid on any meaningful gains.
• The focus remains glued to Wednesday’s release of the US CPI report.

The AUD/USD pair managed to recover a major part of its early lost ground to four-week lows and was last seen hovering with modest losses, around the 0.7370-65 region.

The pair added to the previous day's losses and witnessed some follow-through selling during the early part of the trading action on Wednesday. A combination of factors helped revive the US dollar demand and exerted some downward pressure on the AUD/USD pair, though the intraday slide stalled just ahead of mid-0.7300s.

The greenback drew some support from a goodish pickup in the US Treasury bond yields amid prospects for an early policy tightening by the Fed. Expectations that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflation acted as a tailwind for the US bond yields.

Meanwhile, worries about a faster-than-anticipated rise in inflationary pressure led to some profit-taking in the global equity markets. This was seen as another factor that benefitted the greenback's relative safe-haven status and further collaborated to drive flows away from the perceived riskier Australian dollar.

The downside, however, remains cushioned as investors seemed reluctant to place aggressive bets ahead of Wednesday's release of the US consumer inflation figures. The data will play a key role in influencing market expectations about the Fed's next policy move and drive the greenback demand in the near term.

Apart from this, traders will take cues from the Australian monthly employment figures, scheduled for release during the Asian session on Thursday, to determine the next leg of a directional move. In the meantime, the 100-day SMA support breakpoint, around the 0.7375 region, should cap the upside for the AUD/USD pair.

Technical levels to watch