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The AUD/USD pair finds traction for a second consecutive day on Wednesday and surges to a two-week high in the 0.6715-0.6720 range during the Asian session.

The US Dollar (USD) falls for the fifth consecutive day on speculation that the Federal Reserve (Fed) has limited room to continue tightening monetary policy and is approaching the end of its rate-hiking cycle. In fact, the USD Index (DXY), which measures the Greenback versus a basket of currencies, falls to its lowest level since May 11 and turns out to be a significant factor driving the AUD/USD pair higher.

The Friday employment report for the United States revealed that the economy added the fewest positions in two and a half years, indicating that the labour market is cooling. In addition, the New York Fed's monthly survey disclosed on Monday that consumer inflation expectations for the next year fell to 3.8% in June, the lowest level since April 2021. This may permit the Fed to soften its hawkish posture, which continues to weigh on the dollar.

Along with a generally upbeat equity market sentiment, this is viewed as another factor undermining the safe-haven USD and benefiting the risk-sensitive Australian dollar. In the meantime, the most recent upswing over the past hour or so could also be attributed to technical buying on sustained strength above the extremely important 200-day Simple Moving Average (SMA) resistance near the 0.6700 round-number mark.

As a result, it remains to be seen if the momentum is supported by genuine buying or if it is merely a stop-run, as the market remains fixated on the US consumer inflation figures, which are scheduled to be released later during the early North American session. The crucial US CPI report will influence the Fed's policy outlook, which will in turn drive USD demand and provide fresh direction for the AUD/USD pair.

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