• AUD/USD oscillated in a narrow trading band through the early part of the European session.
  • Hawkish Fed expectations, rising US bond yields underpinned the USD and capped the upside.
  • Investors, however, seemed reluctant to place aggressive bets ahead of the key US CPI report.

The AUD/USD pair seesawed between tepid gains/minor losses through the early part of the European session and was last seen trading around mid-0.7100s.

Following the overnight pullback from a nearly two-week high, the AUD/USD pair witnessed a range-bound price action on Friday as investors await the US consumer inflation figures for a fresh impetus. The US CPI report is due for release later during the early North American session and will be looked upon for fresh clues about the Fed’s near-term policy outlook.

The markets have been pricing in the prospects for an early policy tightening by the Fed amid worries about the persistent rise in inflationary pressures. A stronger print will reaffirm the hawkish Fed expectations, which, in turn, would result in a stronger US dollar and suggests that the AUD/USD pair’s recent recovery from the YTD low has run out of steam.

In the meantime, the USD drew some support from a fresh leg up in the US Treasury bond yields. Apart from this, a generally weaker tone around the equity markets further benefitted the greenback’s safe-haven status. Heading into the key data risk, the combination of factors might continue to cap any meaningful upside for the perceived riskier aussie.

Technical levels to watch

This article was originally published by Fxstreet.com.Read the original article here.

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