AUD/USD hangs near daily lows, just below mid-0.7700s

• AUD/USD struggled to capitalize on its intraday positive move to the 0.7775 region.
• The optimistic US economic outlook underpinned the greenback and capped gains.
• The risk-on mood might help limit the downside ahead of the FOMC on Wednesday.

The AUD/USD pair retreated around 30 pips from daily tops and has now dropped to the lower end of its intraday trading range, just below mid-0.7700s.

The underlying bullish sentiment extended some support to the perceived riskier aussie and assisted the pair to regain some positive traction on the first day of a new trading week. The uptick got an additional boost following the release of better-than-expected Chinese Retail Sales and Industrial Production figures, which helped offset an unexpected rise in jobless rate and disappointing Fixed Asset Investment data.

Meanwhile, growing market bets about a relatively faster US economic recovery from the pandemic continued underpinning the US dollar. Investors remain optimistic about the US economic outlook amid the impressive pace of COVID-19 vaccinations and the passage of a massive US fiscal stimulus package. This, in turn, kept a lid on any further gains for the AUD/USD pair, rather prompted some selling near the 0.7775 region.

That said, the downside remains cushioned, at least for the time being, as investors seemed reluctant to place any aggressive bets ahead of the FOMC monetary policy meeting this week. The Fed decision should influence the US bond yields and play a key role in driving the USD in the near-term. This, in turn, will provide a meaningful impetus and assist traders to determine the next leg of a directional move for the AUD/USD pair.

In the meantime, the broader market risk sentiment and the USD price dynamics will be looked upon for some trading opportunities amid absent relevant market-moving economic releases on Monday.

Technical levels to watch