AUD/USD recovers early lost ground, flat-lined around 0.7420 region

• Sustained USD selling bias assisted AUD/USD to reverse an early dip to sub-0.7400 levels.
• The risk-off impulse kept a lid on any meaningful upside for the perceived riskier aussie.
• Investors look forward to the US PPI and Fed Chair Powell’s comments for some impetus.

The AUD/USD pair reversed an intraday dip to sub-0.7400 levels and refreshed daily tops in the last hour, albeit lacked any follow-through. The pair was last seen hovering around the 0.7420 region, nearly unchanged for the day.

A generally weaker trading sentiment around the Asian equity markets exerted some pressure on the perceived riskier aussie during the early part of the trading action on Tuesday. That said, the ongoing US dollar retracement slide assisted the AUD/USD pair to rebound around 30-35 from the Asian session lows, near the 0.7390 region.

The greenback extended its retracement slide from the post-NFP swing highs and was pressured by the Fed's dovish outlook, indicating that policymakers were in no rush to hike borrowing costs. This, along with the risk-off impulse in the markets, triggered a fresh leg down in the US Treasury bond yields and further undermined the greenback.

That said, investors still seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. The speculations were further fueled by the overnight hawkish comments by a slew of FOMC members, signalling that the central bank could raise rates by the end of 2022.

Hence, the market focus remains glued to Wednesday's release of the latest US consumer inflation figures. The data will influence Fed rate hike expectations and determine the near-term trajectory for the USD. This seemed to be the only factor that might hold back traders from placing aggressive bullish bets around the AUD/USD pair.

In the meantime, traders on Tuesday will take cues from the release of the US Producer Price Index (PPI) and Fed Chair Jerome Powell's remarks at an online conference later during the early North American session. Apart from this, the US bond yields and the broader market risk sentiment might provide some impetus to the AUD/USD pair.

Technical levels to watch