AUD/USD regains the smile and approaches 0.7100 ahead of Fed

• AUD/USD reverses the recent weakness and targets 0.7100.
• Final Manufacturing PMI in Australia eased marginally to 50.0 in January.
• The Fed is largely expected to raise rates by 25 bps later on Wednesday.

The broad-based selling pressure around the greenback lends support to the risk-associated complex and encourages AUD/USD to flirt with the 0.7100 hurdle midweek.

AUD/USD focuses on the Fed’s decision on rates

After three consecutive daily pullbacks – including a drop to multi-session lows near 0.6980 on Tuesday – AUD/USD manages to regain composure against the backdrop of the generalized upbeat tone in the risky assets ahead of the key FOMC event.

On the latter, consensus among investors have already priced in a 25 bps rate hike later on Wednesday, while the subsequent press conference by Chair Powell has grown in importance amidst unabated speculation surrounding a potential pivot in the Fed’s policy.

Earlier in the session, RBA’s M.Kohler hinted at the idea that the inflation in Oz could have peaked by end of 2022.

Data wise Down Under, the final Judo Bank Manufacturing PMI eased marginally to 50 in January (from 50.2) and Commodity Prices rose 10.6% in the year to January.

AUD/USD levels to watch

At the moment the pair is advancing 0.44% at 0.7085 and a break above 0.7142 (2023 high January 26) would expose 0.7200 (round level) and finally 0.7282 (monthly high June 3 2022). On the downside, the next support lines up at 0.7000 (round level) seconded by 0.6983 (weekly low January 31) and then 0.6871 (weekly low January 19).