AUD/USD pares early losses, turns flat near 0.7150

• AUD/USD recovers its losses after dropping toward 0.7100.
• USD’s market valuation continues to drive the pair’s action.
• Conference Board’s Consumer Confidence data from US will be watched closely.

The AUD/USD pair gained more than 50 pips on Monday but struggled to preserve its bullish momentum on Tuesday. After slumping to a daily low of 0.7114 during the European trading hours, however, the pair staged a rebound and turned flat on the day at 0.7150.

Eyes on Australian inflation data, FOMC

The USD’s market valuation continue to impact AUD/USD movements on Tuesday. The US Dollar Index (DXY), which lost 0.75% and posted its lowest daily close in nearly two years at 94.65 on Monday, rose to 94.00 on Tuesday. Nevertheless, the lack of fundamental drivers behind that rebound suggests that it’s a technical correction and could remain shallow. In fact, the DXY is now up only 0.08% on the day at 93.73.

Later in the session, the Conference Board’s Consumer Confidence data will be looked upon for fresh impetus. More importantly, investors will be waiting for the FOMC to conclude its two-day meeting and release its policy statement on Wednesday.

On the other hand, the Australian Bureau of Statistics’ inflation report will be published during the Asian session on Wednesday. Markets expect the annual Consumer Price Index (CPI) to fall fo -0.4% in the second quarter of the year. A lower-than-expected reading could weigh on the AUD and cause the pair to target below 0.7100.

Technical levels to watch for