AUD/USD Price Gains Capped by 0.7250, Eying US Retails, Fed

• The AUD/USD pair gains momentum on Wednesday for a second straight day, marking a weekly high.
• Risk-taking declined, undermining the safe-haven dollar and benefiting the riskier Aussie.
• It is expected that the Fed’s hawkish expectations of higher US bond yields will limit the dollar’s losses and curb the pair’s rise.
• Before the FOMC minutes, investors are eagerly awaiting US retail sales data.

The AUD/USD price rose sharply at the start of the European session, hitting a new weekly high of 0.7175-0.7180 in the last hour.

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The AUD/USD pair rebounded on Wednesday from 0.7100 after investors shrugged off weaker than expected inflation data from China. However, global risk sentiment continued to undermine the safe-haven US dollar, which contributed to the perception of an Australian currency that is riskier.

The risk sentiment is supported by the diminishing fears of a full-fledged conflict between Russia and the West over Ukraine. After training, some of Russia’s troops will return to bases near Ukraine’s border, allaying fears of major military action and triggering new trade tensions.

The AUD/USD pair, however, has little upside potential due to the prospect of faster Fed tightening. As a matter of fact, markets anticipated that the Fed would raise rates by 50 basis points in March. As a result, the dollar is expected to be supported by higher US Treasury yields.

As a result, the market is paying close attention to the FOMC meeting minutes due later this Thursday, which will provide new insights into the Fed’s tightening cycle. Additionally, traders can caution aggressive bullish traders by waiting on the sidelines and positioning for further gains.

Later in the early North American session, the US Economic Report will release monthly retail sales data. US bond yields will also affect US dollar demand. Furthermore, a broader stance on market risk could provide some trading opportunities for the AUD/USD pair.

AUD/USD price technical analysis: Volume lacking strength

The AUD/USD price has broken above the 200-period SMA on the 4-hour chart. The pair seems strongly bullish as the key SMAs are sloping upwards. The pair is standing around 0.7180 (horizontal level). If the pair breaks it, the next key level is 0.7250 which is a swing high.

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On the flip side, 0.7100 is the crucial support. As long as the price remains above this level, we expect the price to stay bullish and aim for 0.7250 and above.

The average daily range is 55% at the moment. Meanwhile, the volume data is too feeble to support the bulls for now. Hence, any upside may remain shallow and fund strong selling around the key level.

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