AUD/USD moves little post-US Retail Sales, focus remains on FOMC minutes

• AUD/USD gained traction for the second successive day amid modest USD weakness.
• Hawkish Fed expectations, upbeat US Retail Sales helped limit any further USD losses.
• Investors might prefer to wait on the sidelines ahead of the FOMC meeting minutes.

The AUD/USD pair retreated a few pips from the weekly high touched earlier this Wednesday and traded with modest intraday gains, around the 0.7165 region post-US macro releases.

Following a brief consolidation phase through the early part of the trading on Wednesday, the AUD/USD pair gained some positive traction and built on the overnight rebound from the 0.7100 mark. Easing fears about the risk of Russia invading Ukraine continued undermining the safe-haven US dollar, which, in turn, was seen as a key factor that benefitted the perceived riskier aussie.

That said, rising bets for a 50 bps Fed rate hike in March acted as a tailwind for the buck, which further drew support from mostly upbeat US economic data. In fact, the US Census Bureau reported that monthly Retail Sales recorded strong-than-expected growth of 3.8% in January. Excluding autos, core retail sales also surpassed estimates and climbed by 3.3% during the reported month.

A sharp improvement in consumer spending reinforced market expectations that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation. This was evident from elevated US Treasury bond yields, which helped limit the intraday USD losses. Traders, however, refrained from placing aggressive bets ahead of the FOMC meeting minutes, due later during the US session.

Investors will look for fresh clues about the likely pace of the Fed's policy tightening cycle, which will play a key role in influencing the near-term USD price dynamics. Apart from this, the broader market risk sentiment would provide some impetus to the AUD/USD pair and allow traders to grab short-term opportunities.

Technical levels to watch