AUD/USD pushes higher toward 0.7350 as USD remains on the back foot

• AUD/USD posts modest daily gains above 0.7300 on Wednesday.
• USD struggles to find demand ahead of FOMC’s policy announcements.
• Labour market data from Australia will be released on Thursday.

The AUD/USD pair closed the first two days of the week modestly higher and preserved its bullish momentum on Wednesday. As of writing, the pair was up 0.5% on the day at 0.7338.

DXY stays in red below 93.00 ahead of FOMC

The broad-based USD weakness ahead of the FOMC’s highly-anticipated monetary policy announcements seems to be helping the pair to edge higher. At the moment, the US Dollar Index (DXY) is down 0.23% on the day at 92.86. Furthermore, August Retail Sales data will be featured in the US economic docket. 

Previewing the FOMC’s September meeting, “we no longer expect yield curve control to be a Fed policy tool,” said UOB Group economist Lee Sue Ann and noted that investors will be focused on the Updated Economic Projection.

Meanwhile, “while the Committee will recognise the improvement in domestic data (especially unemployment), Powell will still paint a dovish, uncertain outcome,” said JP Morgan analysts. A dovish tone in FOMC Chairman Jerome Powell’s press conference could force the USD to remain on the back foot.

In the early Asian session on Thursday, the Australian Bureau of Statistics will publish its labour market report. Investors expect the Employment Change to come in at -50K and a worse-than-expected reading could weigh on the AUD. Earlier in the week, the Reserve Bank of Australia reiterated that it will not increase the policy rate target until progress is made towards full employment and inflation.

Technical levels to watch for