AUD/USD edges lower toward 0.74 as DXY retraces daily losses

• US Dollar Index shakes off the bearish pressure in the NA session.
• Copper futures  advance to 2-week highs on Tuesday.
• Inflation data from Australia will be watched closely in the Asian trade.

The AUD/USD pair rose to a fresh daily high at 0.7433 on Tuesday but failed to preserve its bullish momentum as greenback  started to gather strength in the NA session. As of writing, the pair was trading at 0.7415, still up 0.45% on the day.

Earlier today, the combination of a broad-based USD sell-off and the robust gains seen in copper prices provided a boost to the pair. Copper futures  on Tuesday added nearly 3% to touch its best level since July 11 at 2.835. Now in a consolidation phase, copper futures were up 2.4% on the day at 2.813.

On the other hand, following its technical correction on Monday, the US Dollar Index struggled to find additional demand on Tuesday amid mixed macroeconomic data releases. Both the service and composite PMI data released by Markit economics fell short of the market expectations in the U.S. while the manufacturing PMI came in a little above experts’ estimate. Furthermore, Richmond Fed’s Manufacturing Index met June’s reading with 20 in July.

The initial reaction to the data dragged the US Dollar Index to a fresh daily low of 94.40. However, rising T-bond yields helped the greenback gather strength against its rivals and the DXY was last seen virtually unchanged on the day at 94.65.

In the early trading hours of the Asian session on Wednesday,  the Australian Bureau of Statistics will publish the second quarter CPI figures. “The RBA puts emphasis on the measure of CPI inflation which excludes volatile items (such as food and energy) and on the weighted and trimmed mean.  All of these measures are expected to come in below the headline rate at around the 1.9% which is consistent with still subdued growth in consumption and low wage increase,” Rabobank analysts argue.

Technical levels to consider

The initial support for the pair aligns at 0.7400 (psychological level) ahead of  0.7345 (Jul. 17 low) and 0.7315 (Jul. 20 low). On the upside, could be seen at 0.7460 (50-DMA), 0.7500 (psychological level), and 0.7575 (Jun. 14 high).