AUD/USD sticks to gains around 0.6700 mark, traders keenly await FOMC decision

• AUD/USD regains positive traction on Wednesday amid sustained USD selling.
• Bets for a less hawkish Fed and easing fears of a banking crisis weigh on the buck.
• Investors now look to the crucial FOMC decision for a fresh directional impetus.

The AUD/USD pair attracts fresh buying on Wednesday and reverses a major part of the previous day's retracement slide from the vicinity of a two-week high. The pair sticks to its intraday gains through the first half of the European session and is currently placed near the top end of its daily range, around the 0.6700 mark.

As investors look past the Reserve Bank of Australia's (RBA) hint of a rate pause, the prevalent selling bias around the US Dollar (USD) turns out to be a key factor that assists the AUD/USD pair to regain positive traction. It is worth recalling that the minutes of the RBA meeting held on March 7 revealed a step down in hawkishness as policymakers only considered a 25 bps hike and agreed to revisit the case for a pause at the April meeting amid the uncertain economic outlook. The Fed, meanwhile, is expected to soften its hawkish stance, which drags the USD to a fresh multi-week low and acts as a tailwind for the major.

In fact, the markets have been pricing in a greater chance of a 25 bps rate hike at the end of a two-day FOMC meeting later this Wednesday. Furthermore, the recent collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - fueled speculations that the Fed might cut rates during the second half of the year. Hence, investors will scrutinize the accompanying monetary policy statement, the updated economic projections and Fed Chair Jerome Powell's remarks at the post-meeting press conference for clues about the future rate-hike path, which will provide a fresh impetus to the AUD/USD pair.

Heading into the key central bank event risk, the aforementioned mixed fundamental backdrop might hold back traders from placing aggressive directional bets. That said, easing fears about a full-blown banking crisis should keep the USD bulls on the defensive and continue to lend some support to the risk-sensitive Aussie, at least for the time being.

Technical levels to watch