• AUD/USD has gauged temporary support near 0.6720 amid a cautious market mood.
  • The Fed is expected to resume its rate-hike cycle after a skip in June.
  • The RBA could borrow some more time for pausing the policy-tightening cycle if second-quarter inflation softens significantly.

The AUD/USD pair has found temporary support around 0.6720 in the Asian session. The Aussie asset is consistently declining from the past week as the US Dollar Index (DXY) makes a solid comeback amid hopes of one more interest rate hike from the Federal Reserve (Fed).

S&P500 futures are demonstrating a choppy performance amid a cautious market mood ahead of Fed policy. The US Dollar Index is showing a non-directional performance marginally above 101.00, preparing a fair battleground ahead of an interest rate decision by the Fed. But before that, preliminary United Stated S&P PMI data for July will be keenly watched.

As per the expectations, Manufacturing PMI is seen marginally expanding to 46.4 vs. the former release of 46.3. Services PMI is seen lower at 54.1 against the former release of 54.4. A figure below 50.00 is considered a contraction in economic activities.

Meanwhile, a major focus will be on Fed’s monetary policy, which will be announced on Wednesday. Fed chair Jerome Powell is expected to resume its policy tightening spell after a skip in June as core price pressures are still stubborn.

On the Australian Dollar front, S&P reports mix PMI data in early Tokyo. Manufacturing PMI remains higher at 49.6 against the prior release of 48.2. Services PMI landed sharply below 48.0 vs. the former release of 50.3.

Going forward, Australia’s second quarter inflation data will be keenly watched, which will be published on July 26 at 01:30 GMT. As per the consensus, inflation gained at a pace of 1.0% vs. the prior pace of 1.4% on a quarterly basis. Annual Consumer Price Index (CPI) contracted to 6.2% against 7.0% the prior release. Monthly CPI is expected to soften to 5.4%. A decline in CPI could lend some more time to the Reserve Bank of Australia (RBA) for a fresh interest rate hike.