AUD/USD clings to CPI-inspired gains near 0.69

After closing the previous ten days in the negative territory, the AUD/USD pair gained traction and finally staged a decisive recovery boosted by the inflation data from Australia. With the market action turning subdued ahead of the day's key events, the pair is clinging to its daily gains a tad below the 0.69 mark, adding 0.35% on a daily basis.

Earlier today, the Australian Bureau of Statistics reported that inflation, as measured by the Consumer Price Index (CPI), rose to 0.6% on a quarterly basis in the second quarter after staying flat in the first quarter and improved to 1.6% on a yearly basis to beat the market expectation of 1.5%. With this data suggesting that the Reserve Bank of Australia could pause rate cuts to keep inflation under control helped the Aussie gather strength.

Moreover, several news outlets reported that sides had construction discussions in Tuesday's high-level US-China trade negotiations, reviving hopes of the trade conflict coming to an end and allowing trade-sensitive antipodeans to find demand.

Fed is set to cut policy rate by 25 basis points

Meanwhile, the US Dollar Index continues to move sideways in the upper half of this week's range above 98 while investors are gearing up for the FOMC's policy announcements. Previewing the event, "The market currently fully prices a 25bp cut and implies a 16% chance of a larger 50bp cut," said Deutsche Bank analysts. "Although the Fed have given no real encouragement to the notion of a 50bps cut it’s worth noting that the last time the Fed began a series of rate cuts, in September 2007, their opening move was a 50bp cut, and a similar 50bp cut happened when the Fed began cutting in January 2001.”

Technical levels to watch for