AUD/USD clings to gains near 0.7275 region, lacks follow-through

The AUD/USD pair maintained its bid tone through the early European session, albeit has retreated few pips from daily tops and was last seen hovering near the 0.7270-75 region.

The pair managed to gain some positive traction on the first day of a new trading week and reversed a major part of Friday's retracement slide from the 0.7315-20 region. The prevalent risk-on mood undermined the safe-haven US dollar and provided a modest lift to the perceived riskier aussie. However, a combination of factors acted as a tailwind for the greenback and capped any meaningful gains for the AUD/USD pair, at least for the time being.

Investors remain worried about risks from the debt crisis at China Evergrande Group, especially after a deadline for paying $83.5 million in bond interest passed without any remarks from the company. Apart from this, prospects for an early rate hike by the Fed should help limit any deeper losses for the greenback. It is worth recalling that the Fed's so-called dot plot indicated policymakers' inclination to raise interest rates in 2022.

Meanwhile, the AUD/USD pair, so far, has been struggling to find acceptance, or build on the momentum beyond the 0.7300 mark. This further makes it prudent to wait for a sustained strength beyond the 0.7315-20 region before traders start positioning for any further appreciating move. Market participants now look forward to the release of the US Durable Goods Orders data and speeches by a slew of influential FOMC members for a fresh impetus.

Technical levels to watch