AUD/USD consolidates its gains below 0.6400 ahead of Chinese PMI data

• AUD/USD oscillates around 0.6370 amid the weaker USD and risk-on mood.
• The upbeat Australia’s Retail Sales raise the odds for more rate hikes from the Reserve Bank of Australia (RBA).
• The Federal Reserve (Fed) said they would keep rates steady in November, but December will depend on data.

The AUD/USD pair consolidates its recent gains during the early Asian session on Tuesday. The pair hovers around 0.6370 after retracing from the previous day’s high of 0.6384. The upbeat Australian data and risk-on sentiment lend some support to the Australian Dollar (AUD) ahead of the highly-anticipated Federal Reserve (Fed) meeting on late Wednesday.

That being said, the better-than-expected Australia Retail Sales on Monday raise the odds for another rate hike from the Reserve Bank of Australia (RBA) in its upcoming meeting next week. The figures came in at 0.9% MoM versus 0.3% prior.

Furthermore, the pullback of the US Dollar (USD) acts as a tailwind for the pair. The US Dollar Index (DXY) loses traction to 106.13 while the US Treasury yields take a breather, with the 10-year yield standing at 4.88%

Apart from this, market players will keep an eye on China's PMI data due later in the Asian session on Tuesday. The nation’s Manufacturing PMI is expected to remain in expansionary territory by growing to 50.2. The Non-Manufacturing PMI is estimated to rise to 51.8. The stronger data might alleviate concern about the sluggish economic condition in the world’s second economy and benefit the China-proxy Aussie.

On the USD’s front, the Fed affirmed that they would leave interest rates unchanged on Wednesday, but whether they will hold for December will depend on the incoming data. According to the CME Fedwatch tools, Markets currently priced in a 23% chance of the Fed hiking 25 basis points (bps) in the December meeting. On Monday, the US Dallas Fed Manufacturing Index dropped to -19.2 in October from 18.1 fall in the previous reading.

Looking ahead, Australia’s Private Sector Credit for September is due on Tuesday, followed by China’s PMI date. In the American session, US housing data and Consumer Confidence will be released. The attention will shift to the Fed policy meeting on Wednesday. Traders will take cues from the data and find trading opportunities around the AUD/USD pair.