AUD/USD struggles for direction, stuck in a range around 0.7700 mark
- AUD/USD was seen oscillating in a range through the early European session on Monday.
- The prevalent risk-on environment extended some support to the perceived riskier aussie.
- A modest USD strength held bulls from placing fresh bets and capped any meaningful gains.
The AUD/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses, around the 0.7700 mark through the early European session.
A combination of diverging forces failed to provide any meaningful impetus to the AUD/USD pair and led to a subdued/range-bound price action on the first day of a new trading week. This comes on the back of the previous session’s dramatic turnaround from two-and-half-week tops and favours bearish traders.
The underlying bullish sentiment in the financial markets – as depicted by an extended rally in the global financial markets – acted as a tailwind for the perceived riskier aussie. That said, a modest US dollar strength largely offset the supporting factor and capped the upside for the AUD/USD pair.
The USD consolidated Friday’s strong move up to one-week tops amid expectations that the Fed might begin the discussion on tapering its asset purchases in the wake of rising inflationary pressures. It is worth recalling that the pace of inflation in the US climbed to a 13-year high in May.
This, along with signs of stability in the US Treasury bond yields, forced investors to lighten their bearish USD bets ahead of the FOMC policy meeting this week. Nevertheless, the fundamental backdrop might hold traders from placing aggressive bullish bets around the AUD/USD pair, at least for now.
There isn’t any major market-moving economic data due for release from the US on Monday. Hence, the US bond yields will continue to play a key role in influencing the USD price dynamics. Apart from this, the broader market risk sentiment might further provide some impetus to the AUD/USD pair.