AUD/USD flirts with session lows, eyeing mid-0.7400s

The AUD/USD pair traded with a mild negative bias heading into the European session and was last seen hovering near the lower boundary of its intraday range, around the 0.7465-70 region.

The pair struggled to capitalize on Friday's solid rebound from the vicinity of the 0.7400 mark, or YTD lows and failed ahead of the key 0.7500 psychological mark on the first day of a new trading week. The optimism led by the People’s Bank of China’s rate cut announcement turned out to be short-lived, instead was overshadowed by concerns about new coronavirus variants. This, in turn, acted as a headwind for the perceived riskier aussie and capped the upside for the AUD/USD pair.

The prevalent cautious mood extended some support to the safe-haven US dollar, which was further underpinned by expectations that the Fed is moving towards tightening its monetary policy sooner. In fact, the June FOMC meeting minutes released last Wednesday revealed that Fed officials agreed on the need to be ready to act if inflation or other risks materialize. Hence, the market focus will remain on the latest US consumer inflation figures, due for release on Tuesday.

Apart from this, Fed Chair Jerome Powell's semi-annual congressional testimony on Wednesday and Thursday will be looked upon for clues about the US central bank's policy outlook. This will play a key role in influencing the near-term USD price dynamics. Traders will further take cues from Thursday's release of monthly employment details from Australian to determine the next leg of a directional move for the AUD/USD pair.

In the meantime, developments surrounding the coronavirus saga will drive the broader market risk sentiment. This, along with the USD price dynamics could provide some impetus to the AUD/USD pair and allow traders to grab some short-term opportunities.

Technical levels to watch