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  • The upbeat market mood extended some support to the perceived riskier aussie on Monday.
  • Upbeat NFP report, rising US bond yields undermined the USD and capped gains for AUD/USD.
  • Investors now eye US ISM Services PMI for some impetus ahead of the RBA meeting on Tuesday.

The AUD/USD pair struggled to capitalize on its Asian session positive move and has now retreated around 20-25 pips from daily swing highs. The pair was last seen hovering near the 0.7600 round-figure mark, nearly unchanged for the day.

Following the previous session’s modest downtick, the pair managed to gain some positive traction on the first day of a new trading week, though lacked any strong follow-through buying. The prevalent upbeat market mood – as depicted by a bullish trading sentiment around the equity markets – extended some support to the perceived riskier aussie. However, a modest pickup in the US dollar demand kept a lid on any further gains for the AUD/USD pair, rather prompted some selling at higher levels.

The greenback remained well supported by Friday’s blockbuster US monthly jobs report, which added to the narrative of a relatively faster US economic recovery. This, along with the Biden administration’s planned stimulus of more than $2 trillion, spurred economic optimism and fueled speculations about an uptick in US inflation. This, in turn, raised doubts that the Fed would retain ultra-low interest rates for a longer period and triggered a fresh leg up in the US Treasury bond yields.

In fact, the yield on the benchmark 10-year US government bond back above the 1.70% threshold and was seen as another factor lending some support to the greenback. That said, relatively thin liquidity conditions on the back of the Easter Monday holiday in the majority of Asian/European markets capped any meaningful upside for the USD and extended some support to the AUD/USD pair. Investors also seemed reluctant to place any aggressive bets ahead of the RBA policy decision on Tuesday.

In the meantime, Monday’s release of the US ISM Services PMI will be looked upon for some impetus. The data, along with the US bond yields, will influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the AUD/USD pair.

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