AUD/USD erases a major part of intraday gains, back below mid-0.7500s

The AUD/USD pair surrendered a major part of its intraday gains to over one-week tops and has now dropped to the lower end of its intraday trading range, back below mid-0.7500s.

The pair struggled to capitalize on its strong intraday positive move and once again failed near the 0.7600 round-figure mark. The US dollar found some support from the emergence of some heavy selling around the shared currency in reaction to the disappointing release of ZEW survey results. This, in turn, was seen as a key factor that prompted some fresh selling around the AUD/USD pair.

Apart from this, concerns about the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment. This was evident from the prevalent cautious mood around the equity markets. This was seen as another factor that acted as a tailwind for the safe-haven greenback and drove flows away from the perceived riskier aussie.

The USD held steady and seemed rather unaffected by softer-than-expected US ISM Services PMI, which fell to 60.1 in June as against consensus estimates for a reading of 63.5. Adding to this, the employment sub-component also fell short of market expectations, though was largely offset by a slightly better-than-expected Prices Paid component of the report.

Meanwhile, diminishing odds for an earlier than anticipated policy tightening by the Fed might hold the USD bulls from placing aggressive bets and help limit the downside for the AUD/USD pair. Friday's mixed US jobs report now seemed to have convinced investors that the US central bank will wait for a longer period before tapering its asset purchases or raising interest rates. This, along with a fresh leg down in the US Treasury bond yields might undermine the USD.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent bounce from YTD lows has run out of steam and positioning for any further decline. The market focus will remain glued to Wednesday's release of FOMC meeting minutes. Investors will look for fresh clues about the US central bank's monetary policy outlook, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the AUD/USD pair.

Technical levels to watch