AUD/USD recovers modestly on renewed trade optimism, trades above 0.6800

The AUD/USD pair rose to 0.6840 area during the Asian trading hours supported by upbeat data from Australia and higher-than-expected inflation readings from China. However, the pair struggled to preserve its momentum amid a lack of positive developments surrounding the US-China trade conflict and slumped to a fresh weekly low of 0.6800 before recovering modestly during the American trading hours.

The National Australia Bank's Business Conditions Index stayed unchanged at 4 in November but beat the market expectation of 2. Moreover, the annual House Price Index came in at -3.7% in the third quarter following the second quarter's reading of -7.4% to help the Aussie find demand.

In the second half of the day, the Wall Street Journal (WSJ) reported that the US' and China's trade negotiators were working toward delaying the December 15 tariff hike to provide a boost to the market sentiment and trade-sensitive AUD.

Markets remain cautious ahead of key events

During the Asian session on Wednesday, Westpac Consumer Confidence Index from Australia, which is expected to fall to -0.7% in December from 4.5% in November, will be looked upon for fresh impetus. More importantly, investors will be looking to see what China has to say about the WSJ report.

Later in the day, the FOMC will release its policy statement and Chairman Powell will be delivering his remarks on the policy outlook. Ahead of this event, the US Dollar Index is down 0.22% at 97.45 on Tuesday, helping the pair stay afloat above the 0.6800 handle.

Previewing Wednesday's FOMC meeting, "following three cuts in a row, we expect the Fed to remain on hold (target range 1.50-1.75%) when it meets next week," said Danske Bank analysts. "FOMC members have made it clear that they think the 'current stance of monetary policy is appropriate' and that they now want to wait sometime and see how things play out before acting again."

Technical levels to watch for