AUD/USD retreats from psychological resistance as the Fed remains in the spotlight

• AUD/USD slips to Fibonacci support as the US Dollar recovers.
• The US labour market remains in focus, with Wednesday's ADP numbers expected to provide insight into the health of the US private sector.
• Psychological resistance firms at 0.6500 as AUD/USD remains vulnerable to the key psychological level that is proving difficult to break.

The Australian Dollar (AUD) is erasing some of its gains against the US Dollar (USD) on Tuesday, after experiencing a positive surge in bullish momentum on Monday.

After gaining 1% in the previous session, the AUD/USD price pair's failure to reclaim the 0.6500 psychological level has enabled bears to drive it back toward a critical level of Fibonacci support near 0.6464.

AUD/USD daily chart

This level corresponds to the 61.8% Fibonacci level of the March 2020 to February 2021 move, which has provided a critical level of support and resistance for historical moves.

AUD/USD continues to monitor the US labour market in search of clues on the Fed's next move

As broader economic and geopolitical risks continue to drive demand for the US Dollar (USD) and its major counterparts, such as the Australian Dollar, the economic calendar remains key for near-term price action.

The main focus for a large portion of the year has been on the monetary policy divergence between global central banks. For the Reserve Bank of Australia, the release of the RBA Meeting Minutes on Tuesday reiterated the central bank's commitment to monitoring trade developments and broader risks before committing to keeping interest rates on hold in upcoming meetings.

While the cautious tone of the RBA and the hawkish tone reflected by the Federal Reserve (Fed) have provided a headwind for AUD/USD bulls, interest rates have been largely priced in. 

Instead, focus remains on how the US labour market is performing under current circumstances, which could alter the near-term expectations for the Fed. With Tuesday's JOLTS data showing that the number of job openings in the United States (US) rose above analyst forecasts in April, Wednesday's ADP numbers serve as an additional catalyst for the US Dollar. 

These figures, scheduled for 12:15 GMT, provide insight into the health of the US private sector, which is expected to show an increase of 115,000 jobs added in April. The release comes two days before the US Nonfarm Payrolls (NFP) report scheduled for Friday, which serves as a key barometer for the US labour market and interest rate expectations.

At the time of writing, the CME FedWatch Tool indicates a 54.4% probability of the Fed cutting interest rates in September. The Fed is expected to leave interest rates unchanged within the 4.25% to 4.50% range in June and July.