The AUD/USD pair attracts some sellers on Wednesday and moves away from a fresh year-to-date high, around the 0.6590 area touched the previous day. Spot prices remain depressed near the 0.6565-0.6560 region through the first half of the European session, though the downside potential seems limited.

The Australian Dollar (USD) is weighed down by unimpressive domestic data, which reaffirmed bets that the Reserve Bank of Australia (RBA) will cut interest rates again in July. The Australian Bureau of Statistics (ABS) reported that Retail Sales grew 0.2% MoM in May compared to 0% in April, though it fell short of estimates for a 0.4% rise. Adding to this, a modest US Dollar (USD) strength turns out to be another factor exerting downward pressure on the AUD/USD pair.

Any meaningful USD recovery from a multi-year low touched on Tuesday, however, still seems elusive amid the growing acceptance that the Federal Reserve (Fed) will resume its rate-cutting cycle in the near future. In fact, traders see a small chance that the next rate reduction by the Fed will come in July and are pricing in over a 75% probability of a rate cut at the September policy meeting. This could act as a headwind for the buck and help limit losses for the AUD/USD pair.

Traders might also refrain from placing aggressive bets and opt to wait for the release of the US Nonfarm Payrolls (NFP) report on Thursday. The crucial data will influence market expectations about the Fed's rate-cut path, which, in turn, will drive the USD demand and provide a fresh impetus to the AUD/USD pair. In the meantime, the US ADP report on private-sector employment will be looked at for short-term opportunities later during the North American session this Wednesday

Source; Fxstreet