The AUD/USD struggles to maintain gains, hovering near the 0.6350 zone as bullish momentum fades.
China's economic stimulus provided initial support, but investors turn cautious ahead of key US data.
Technical indicators suggest consolidation, with the pair facing resistance near recent highs.
The AUD/USD rebound halts near 0.6350 as market caution prevails. The pair lost momentum on Tuesday after initially benefiting from renewed optimism surrounding China's economy. The Australian Dollar found support from Beijing's special action plan to boost household incomes and domestic consumption. However, investors shifted to a cautious stance ahead of the Federal Reserve's monetary policy decision on Wednesday, where the dot plot and Summary of Economic Projections (SEP) will provide further clarity on future interest rate moves.
Australian Dollar loses steam ahead of Fed decision
The Australian Dollar's rally stalled on Tuesday, with AUD/USD struggling to hold recent gains as traders reassessed risk sentiment. Despite optimism from China's economic measures, uncertainty ahead of the Federal Reserve's policy outlook kept market participants cautious.
China's stimulus efforts remain in focus. The country's special action plan aims to strengthen household income and improve domestic spending, which is crucial for Australia's export-driven economy. However, lingering concerns over the global trade environment limited further upside for the Aussie.
The Federal Reserve's dot plot and SEP take center stage. Investors are looking for updates on the Fed's stance regarding interest rates, inflation, and economic growth projections. In December, Fed officials anticipated two rate cuts in 2025, and any changes could impact US Dollar direction.
The Reserve Bank of Australia (RBA) is expected to remain cautious regarding future interest rate moves. Inflationary risks linked to US trade policies and tariffs continue to pose challenges, adding to the uncertainty surrounding the RBA's next steps.
Australian labor market data, scheduled for March 20, will be a key driver for AUD/USD in the coming sessions. Any unexpected shifts in employment figures could influence expectations for RBA policy decisions.

Source: Fxstreet