AUD/USD recovers a few pips from weekly low, keeps the red below mid-0.6700s post-US PPI

• AUD/USD once again faces rejection near the 100-day SMA amid resurgent USD demand.
• The prospects for an imminent pause in the Fed’s rate-hiking cycle cap gains for the buck.
• The softer-than-expected US PPI fails to impress the USD bulls or provide a fresh impetus.

The AUD/USD pair continues with its struggle to find acceptance above the 100-day Simple Moving Average (SMA) and attracts aggressive sellers in the vicinity of the 0.6800 mark on Thursday. The pair maintains its heavily offered through the early North American session and is currently placed around the 0.6745 region, just a few pips above the weekly low touched earlier today.

As investors look past Wednesday's release of the US CPI report, a generally weaker risk tone pushes the safe-haven US Dollar (USD) to over a one-week high and turns out to be a key factor exerting downward pressure on the AUD/USD pair. Against the backdrop of concerns over the US debt ceiling, mixed Chinese inflation figures released on Thursday fuel worries about the economic outlook for the second quarter and tempers investors' appetite for riskier assets. This, in turn, drives some haven flows towards the buck and undermines the risk-sensitive Aussie.

The upside for the USD, however, remains limited in the wake of growing acceptance that the Federal Reserve (Fed) is nearing the end of its year-long rate-hiking cycles. The bets were reaffirmed by the softer-than-expected release of the US Producer Price Index (PPI) on Thursday, which keeps the US Treasury bond yields depressed and caps the USD. Apart from this, 
the Reserve Bank of Australia's (RBA) hawkish outlook, indicating that some further tightening of monetary policy may be required to ensure that inflation returns to target, and limits losses for the AUD/USD pair.

Spot prices quickly bounce back closer to mid-0.6700s, though the recent repeated failures to build on the momentum beyond a technically significant moving average warrant some caution for bullish traders. The aforementioned supportive fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the upside. Hence, any subsequent downfall might still be seen as a buying opportunity and is more likely to remain limited.

Technical levels to watch