AUD/USD retraces gains, holds near 0.7400

After jumping to 0.7420 area in the early trading hours of the NA session, the AUD/USD pair erased its gains to 0.7383 before making another attempt at the 0.74 handle. As of writing, the pair was trading at 0.7398, up 0.27% on the day.

The pair's upsurge was fueled by the selling pressure witnessed on the greenback following the disappointing inflation and retail sales data, which lowered the expectations of a Fed rate hike in June. The US Dollar Index made a steep fall from mid 99s towards the 99 handle and remains near session lows at 99.05, recording a 0.47% drop on the day. The fact that the index struggles to recover suggests that the AUD/USD pair's correction fall could be attributed to some profit taking.

• CME Group FedWatch's June hike probability eased below 80% post-CPI

Dovish comments from Chicago Fed President Evans, who suggested that the Fed could go for one more rate hike this year if the inflation outlook remains uncertain, are also making it hard for the greenback to find demand. Philly Fed President Harker will cross the wires at 16:30 GMT and if he adopts a dovish tone as well, the index could try to move below the 99 mark, allowing the pair to catch a bullish wave.

• Fed's Evans: Could be okay with one more rate hike if there are more uncertainties about inflation outlook

Technical outlook

With a decisive break above 0.7420 (daily high), the pair could target 0.7460 (20-DMA) and 0.7540 (200-DMA). To the downside, supports align at 0.7330 (May 9 low) ahead of 0.7285 (Jan. 6 low) and 0.72 (psychological level).