AUD/USD surrenders a major part of intraday gains, up little around mid-0.7400s

The AUD/USD pair refreshed daily tops during the early European session, albeit quickly retreated a few pips thereafter. The pair has now slipped back below mid-0.7400s and seems headed towards the lower end of its daily trading range.

Having found some support near the 0.7425 region in the previous day, the AUD/USD pair managed to regain some positive traction on Wednesday and was supported by a softer US dollar. That said, a combination of factors held traders from placing any aggressive bets around the major and capped any meaningful upside, at least for now.

Worries about the worsening coronavirus situation in one of Australia's largest cities acted as a headwind for the aussie. Authorities extended a lockdown in Sydney on Wednesday by at least 14 days. New South Wales state Premier Gladys Berejiklian said restrictions would need to remain in place until at least July 30 to curb a fresh outbreak of COVID-19.

On the other hand, speculations that the Fed would tighten its monetary policy sooner than anticipated continued lending some support to the US dollar. The market expectations were reaffirmed by Tuesday's hotter-than-expected US consumer inflation figures. This further collaborated to keep a lid on any strong gains for the AUD/USD pair.

Investors also prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's semi-annual congressional testimony on Wednesday and Thursday. Powell's remarks on the latest inflation figures should influence expectations about the Fed's policy outlook, which will drive the USD and provide a fresh directional impetus to the AUD/USD pair.

Technical levels to watch