• AUD/USD catches fresh bids on Wednesday and jumps to over a two-week high.
• The USD selling remains unabated and turns out to be a key factor lending support.
• A positive risk tone further benefits the Aussie ahead of the crucial US CPI report.

The AUD/USD pair gains some positive traction for the second successive day on Wednesday and spikes to over a two-week peak, around the 0.6715-0.6720 region during the Asian session.

Speculations that the Federal Reserve (Fed) has limited headroom to continue tightening its monetary policy and is nearing the end of its rate-hiking cycle drag the US Dollar (USD) lower for the fifth straight day. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, drops to its lowest level since May 11 and turns out to be a key factor pushing the AUD/USD pair higher.

The US jobs report released on Friday showed that the economy added the fewest jobs in 2-1/2 years, signalling that the labor market is cooling. Adding to this, the New York Fes's monthly survey revealed on Monday that the one-year consumer inflation expectation dropped to 3.8% in June - the lowest level since April 2021. This could allow the Fed to soften its hawkish stance and continues to weigh on the buck.

This, along with a generally positive tone around the equity markets, is seen as another factor undermining the safe-haven USD and benefitting the risk-sensitive Aussie. Meanwhile, the latest leg-up witnessed over the past hour or so could also be attributed to some technical buying on a sustained strength above the very important 200-day Simple Moving Average (SMA) resistance near the 0.6700 round-figure mark.

Hence, it remains to be seen if the momentum is backed by genuine buying or turns out to be a stop-run as the market focus remains glued to the US consumer inflation figures, due for release later during the early North American session. The crucial US CPI report will influence the Fed's policy outlook, which, in turn, will drive the USD demand and provide a fresh directional impetus to the AUD/USD pair