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  • AUD/USD edged lower during the early European session amid a modest USD uptick.
  • Retreating US bond yields, bullish sentiment might cap any strong gains for the USD.
  • Investors look forward to the US CPI print for some short-term trading opportunities.

The AUD/USD pair witnessed some selling during the early European session and dropped to fresh daily lows, around mid-0.7700s in the last hour.

The pair started retreating after refreshing weekly tops, around the 0.7780 region and has now eroded a part of the previous session’s goodish intraday gains. The latest leg down over the past hour or so could be attributed a modest US dollar uptick, though a combination of factors should help limit losses for the AUD/USD pair.

The US Treasury bond yields extended the overnight retracement slide from the highest level in almost a year and held the USD bulls from placing aggressive bets. The pullback was triggered by the strong demand seen at a $38 billion 10-year auction overnight and comments from Fed officials, reiterating accommodative policy stance.

Apart from this, the underlying bullish sentiment in the financial markets could drive some flows towards the perceived riskier aussie. Hopes for a strong global economic recovery and a more aggressive US fiscal spending in 2021 continued boosting investors appetite, which, in turn, could extend support to the AUD/USD pair.

This makes it prudent to wait for some strong follow-through selling before traders start positioning for any meaningful corrective slide around the AUD/USD pair. Market participants now look forward to the US economic docket, highlighting the release of the latest consumer inflation figures, for some meaningful trading impetus.

Technical levels to watch