AUD/USD flirts with daily lows, around 0.7430 region amid stronger USD

• AUD/USD edged lower on Monday and snapped four consecutive days of the winning streak.
• A goodish pickup in the USD seemed to be the only factor that prompted some profit-taking.
• The downside seems limited amid holiday-thinned liquidity and ahead of the RBA on Tuesday.

The AUD/USD pair maintained its offered tone through the first half of the European session and was last seen trading near daily lows, around the 0.7430-25 region.

The pair witnessed some selling on the first day of a new trading week and moved away from the highest level since mid-July touched in reaction to disappointing headline NFP print on Friday. The AUD/USD pair, for now, seems to have snapped four consecutive days of the winning streak and was pressured by a strong pickup in the US dollar demand.

Friday's mixed US jobs report forced investors to push back expectations about the likely timing when the Fed will begin rolling back its pandemic-era stimulus. However, additional details kept alive hopes for an imminent taper announcement in 2021. This was evident from a sharp spike in the US Treasury bond yields, which acted as a tailwind for the USD.

However, the downside for the AUD/USD pair remains cushioned, at least for the time being, amid relatively thin liquidity conditions on the back of a holiday in the US. Investors might also be reluctant to place any aggressive bets, rather prefer to wait on the sidelines ahead of the Reserve Bank of Australia monetary policy meeting scheduled on Tuesday.

This makes it prudent to wait for some strong follow-through selling before confirming that the recent strong recovery from the 0.7100 mark, or YTD lows has run out of steam. That said, a sustained break below the 0.7400 mark might prompt some technical selling and turn the AUD/USD pair vulnerable to extend the corrective slide towards the 0.7330 horizontal support.

Technical levels to watch