AUD/USD Outlook: Bulls looking to seize control near 0.7500 ahead of Australian CPI

• AUD/USD gained traction for the second straight day amid the prevalent risk-on mood.
• The ongoing USD recovery from one-month lows might keep a lid on any further gains.
• The market focus now shifts to this week’s key macro releases from Australia and the US.

The AUD/USD pair kicked off the new week on a positive note and edged higher for the second successive session on Tuesday. The dominant risk-on mood in the markets continued acting as a tailwind for the risk-sensitive Australian dollar amid the recent widespread rally in commodity prices. The uptick, however, lacked bullish conviction in the wake of a pickup in the US dollar demand. The latest outbreak of COVID-19 infections in China has raised worries about the imposition of economically damaging lockdowns amid the country's zero-tolerance approach to the disease. This, along with the prospects for an early policy tightening by the Fed, drew some haven flows towards the greenback.

The Fed Chair Jerome Powell reaffirmed on Friday that the US central bank will soon begin tapering its bond purchases. Adding to this, fears about a faster than expected rise in inflation have been fueling speculations about a potential interest rate hike in 2022. Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. This was reinforced by elevated US Treasury bond yields, which assisted the USD to build on the previous day's solid rebound from one-month lows. Nevertheless, the pair, so far, has managed to hold 
with its modest intraday gains as the focus now shifts to this week's key data from Australia and the US.

Australian quarterly inflation data is scheduled for release during the Asian session on Wednesday. The risk in the third quarter is that prices might have retreated due to the reintroduction of lockdown measures to fight the Coronavirus Delta variant. A softer print will validate the resolutely dovish Reserve Bank of Australia (RBA) and weigh on the domestic currency. Beyond this, the market focus will be on Thursday's release of the Advance US Q3 GDP growth report, which will set the tone heading into the RBA and FOMC policy meetings next week. In the meantime, Tuesday's US economic docket – featuring the releases of the Conference Board’s Confidence Index, Richmond Manufacturing Index and New Home Sales – will be looked upon for some impetus.

Technical outlook

From a technical perspective, the emergence of some dip-buying on Monday and the subsequent move up favours bullish traders. With technical indicators on the daily chart holding comfortably in the bullish territory, the stage seems set for a move towards retesting multi-month tops, around the 0.7545 region touched last week.

However, the lack of any strong follow-through buying warrants some caution before positioning aggressively for a further appreciating move. Meanwhile, any meaningful pullback might continue to find decent support and attract fresh buying near mid-0.7400s. A convincing break below might prompt some technical selling and drag the pair back towards the 0.7400 round-figure mark. The corrective pullback could further get extended towards the 0.7320-15 strong horizontal resistance breakpoint, which should act as a strong near-term base for the major.