AUD/USD struggles near 0.6800, bears flirt with 200-day SMA ahead of US PCE Price Index

• AUD/USD remains depressed near its lowest level since January amid a bullish USD.
• Bets for additional rate hikes by the Fed, recession fears continue to benefit the buck.
• Traders now look to the Fed’s preferred inflation gauge for a fresh directional impetus.

The AUD/USD pair struggles to capitalize on the previous day's late bounce from a nearly two-month low and attracts some sellers near the 0.6825 region on Friday. Spot prices remain on the defensive around the 0.6800 mark through the early European session, with bears making a fresh attempt to extend the downtrend below a technically significant 200-day SMA.

A combination of supporting factors keeps the US Dollar pinned near a multi-week top, which, in turn, is seen acting as a headwind for the AUD/USD pair. The prospects for further policy tightening by the Federal Reserve remain supportive of elevated US Treasury bond yields and continue to underpin the USD. Apart from this, the prevalent cautious market mood benefits the Greenback's relative safe-haven status and weighs on the risk-sensitive Aussie.

The FOMC meeting minutes released on Wednesday showed that officials were determined to raise interest rates further to fully gain control over inflation. Moreover, the incoming upbeat US macro data pointed to an economy that remains resilient despite rising borrowing costs. In fact, the US Initial Jobless Claims unexpectedly fell last week and indicated a still-tight labor market. This should allow the Fed to stick to its hawkish stance for longer.

The USD bulls, however, seem reluctant and prefer to wait for the release of the US Core PCE Price Index, the Fed's preferred inflation gauge. The data will play a key role in influencing market expectations about the Fed's future rate-hike path. This, in turn, should drive the USD demand in the near term and provide a fresh directional impetus to the AUD/USD pair. Nevertheless, spot prices remain on track to register losses for the second successive week.

Technical levels to watch