AUD/USD consolidates near two-week high, around mid-0.6400s ahead of FOMC decision

The AUD/USD pair struggles to gain any meaningful traction during the Asian session on Wednesday and remains below a two-week high, around the 0.6470-0.6475 area touched the previous day. Spot prices oscillates in a familiar band and currently hover around mid-0.6400s, awaiting the outcome of the highly-anticipated FOMC policy meeting before the next leg of a directional move.

Traders expect the Federal Reserve (Fed) to keep rates on hold and hence, the focus will be on the forward guidance. The markets have been pricing in the possibility of more more 25 bps lift-off by the end of this year in the wake of resilient US macro data and still-sticky inflation. The outlook remains supportive of elevated US Treasury bond yields, which seem to underpin the US Dollar (USD) and act as a headwind for the AUD/USD pair.

The downside, however, seems cushioned as investors look for fresh cues about the Fed's future rate-hike path, which will help in determining the near-term trajectory for the buck. Hence, the focus will remain on the accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference. In the meantime, traders opt to wait on the sidelines, leading to a subdued price action around the AUD/USD pair.

Spot prices, meanwhile, move little in reaction to the People's Bank of China's (PBoC) decision to leave benchmark lending rates unchanged at a monthly fixing, matching market expectations. Meanwhile, speculations that the Reserve Bank of Australia (RBA) might have already ended its rate-hiking cycle warrant some caution before positioning for an extension of the AUD/USD pair's recent recovery from the 0.6355 area, or the YTD low touched earlier this month.

Techincal levels to watch