AUD/USD struggles to hold above 0.6720 on risk-averse sentiment ahead of FOMC minutes

During the Asian session, the AUD/USD pair is under pressure to hold above the immediate resistance level of 0.6720. As the risk-aversion theme affects the Australian Dollar, the Aussie asset is anticipated to re-test the round-level support of 0.6700.

The bearish close of the S&P500 on Tuesday and the lackluster performance of the 500-stock United States index on a broader scale are underlining the pessimism of market players. The US Dollar Index (DXY) turned to a bullish trajectory on Tuesday after tenaciously defending the 103.00 support. In contrast, demand for US government bonds increased, resulting in 10-year Treasury rates falling to 3.76 percent.

Before the release of the Federal Open Market Committee (FOMC) minutes, demand for the US Dollar Index has increased considerably. Investors eagerly await signs regarding the outlook for monetary policy in CY2023.

The current tight labor market and low unemployment rate in the United States provide a significant obstacle for the Federal Reserve (Fed) in its pursuit of a 2% inflation rate. A continuance of stronger monthly job gains in the labor market is attracting higher employment costs to compensate for the labor shortage, which may stimulate future retail demand.

In the meantime, the Australian Dollar is failing to profit on Caixin Manufacturing PMI data that exceeded expectations. IHS Markit provided economic statistics of 49.0, which is greater than the consensus estimate of 48.8 but less than the previous release of 49.4. The street was expecting a decrease in the PMI statistics after detecting negative signs from China’s official Manufacturing PMI data and the fragile state of Covid-19 in China.