AUD/USD surrenders a major part of early gains, US macro data awaited

   •  A modest pickup in the USD demand seemed to cap gains.
   •  Weaker commodity prices fail to lend any support.
   •  US CPI/monthly retail sales data holds the key.

The AUD/USD pair trimmed some of its early gains and retreated around 20-25 pips from session tops, albeit has managed to hold in positive territory through the mid-European session.

The pair built on its recovery move from 6-week lows, set last Friday and gained positive traction for the third session in the previous four. The up-move, however, ran out of steam ahead of the 0.7900 handle and was being capped a pickup in the greenback demand.

In fact, the key US Dollar Index has managed to recover early lost ground on the back of a modest rebound in the US Treasury bond yields and was eventually seen driving flows away from higher-yielding currencies - like the Aussie.

Adding to weaker trading sentiment around commodity prices, especially copper, also did little to underpin demand for the commodity-linked Australian Dollar and further collaborated towards keeping a lid on any additional gains for the major.

Despite a good two-way move, the pair lacked any firm directional bias as traders seemed to refrain from placing aggressive bets ahead of today's important US macro data - inflation figures and monthly retail sales, which might influence March Fed rate hike expectations and also provide some fresh directional impetus.

Technical levels to watch

A follow-through retracement below 0.7860 area (50-day SMA) might turn the pair vulnerable to head back towards retesting the 0.7800 handle before eventually dropping to the very important 200-day SMA support near the 0.7760-55 region. 

On the upside, the 0.7900 handle might continue to act as immediate resistance, above which a fresh bout of short-covering could lift the pair towards 0.7960 intermediate resistance en-route the key 0.80 psychological mark.