AUD/USD drops to retest 0.7400 mark, US data/FOMC in focus

   •  Follow-through USD strength prompts some selling on Wednesday.
   •  Renewed trade-war fears/weaker commodities add to the pressure.
   •  Traders now look forward to the US data/FOMC for fresh impetus.

After an initial uptick to 0.7430 area, the AUD/USD pair met with some fresh supply and has now erased all of its gains recorded in the previous session.

The pair snapped three consecutive days of winning streak and was now being weighed down by a follow-through US Dollar buying interest. Tuesday's report that the US and China seek to restart the trade negotiations, coupled with stronger US consumer confidence index prompted some fresh USD strength and stalled the pair's ongoing positive momentum ahead of a key supply zone near mid-0.7400s.

Meanwhile, the latest news headlines, saying that the US President Donald Trump plans to impose 25% tariffs on around $200 billion worth of Chinese imports, as against 10% speculated earlier, revived US-China trade-war fears and exerted some additional downward pressure on the China-proxy Australian Dollar.

Adding to this, a negative trading sentiment around commodity space, especially copper, undermined demand for the commodity-linked Australian Dollar and further collaborated to the pair's weaker tone through the early European session on Wednesday.

Despite a pull-back, the pair has still managed to defend the 0.7400 handle as the focus now shifts to the latest FOMC monetary policy update, which along with a duo of US macro releases - ADP report on private sector employment and the ISM manufacturing PMI, should provide some meaningful impetus later in the day.

Technical levels to watch

A follow-through selling pressure has the potential to drag the pair back towards 0.7380-75 support area, below which the bearish momentum could further get extended towards 0.7340-35 horizontal zone.

On the upside, the 0.7440-50 region might continue to act as an important barrier, which if cleared might prompt some short-covering move and assist the pair to reclaim the key 0.7500 psychological mark.