AUD/USD struggles to preserve early gains, manages to hold above mid-0.6700s

The AUD/USD pair trimmed a part of its early modest gains, albeit has managed to hold its neck comfortably above mid-0.6700s.

The pair built on the previous session's late rebound from 3-1/2 month lows and gained some follow-through traction during the Asian session on Wednesday following the release of above-forecast Australian inflation data for December.

Bulls struggle to capitalize on the attempted recovery

In fact, the headline CPI rose to 1.8% YoY as against consensus estimates pointing to a steady reading of 1.7%. On the other hand, the trimmed mean core CPI held steady at 1.6% YoY rate but was still slightly better-than the forecasted drop to 1.5%.

Against the backdrop of improving global risk sentiment, the data provided a minor lift to the Australian dollar. The uptick, however, lacked any strong bullish conviction and remained capped below the 0.6800 level amid some renewed US dollar strength.

The greenback remained well supported by Tuesday's upbeat consumer confidence data and got an additional boost from a goodish pickup in the US Treasury bond yields, which eventually turned out to be a key factor that kept a lid on any strong recovery for the major.

Hence, it will be prudent to wait for some strong follow-through buying before positioning for any further positive move. Market participants now look forward to the closely watched FOMC monetary policy decision for some meaningful impetus.

Technical levels to watch