AUD/USD languishes near daily low, around mid-0.6500s despite softer USD

• AUD/USD meets with some supply on Monday, though the downside remains cushioned.
• Retreating US Treasury bond yields undermines the USD and lends support to the major.
• Traders also seem reluctant to place directional bets ahead of this week’s key macro data.

The AUD/USD pair attracts some sellers on Monday following the recent repeated failures to find acceptance above the 100-day Simple Moving Average (SMA) and remains depressed through the first half of the European session. Spot prices currently trade around the mid-0.6500s, though lack follow-through amid a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on last week's goodish rebound from its lowest level since February 2 amid retreating US Treasury bond yields. Apart from this, the Reserve Bank of Australia's (RBA) hawkish stance, signalling that policymakers are unwilling to rule out another cash rate increase in the wake of sticky inflation, is seen lending some support to the AUDUSD pair.

Any meaningful USD downfall, however, seems elusive in the wake of firming expectations that the Federal Reserve (Fed) will wait until the June FOMC policy meeting before cutting interest rates. Furthermore, the risk of a further escalation of tensions between China and Taiwan, along with persistent geopolitical tensions stemming from the Middle East, could undermine the risk-sensitive Australian Dollar (AUD) and cap the AUD/USD pair.

The aforementioned mixed fundamental backdrop warrants some caution before placing aggressive directional bets ahead of this week's important macro releases, including the latest Australian consumer inflation figures on Wednesday. The market focus will then shift to Thursday's release of the US Core PCE Price Index – the Fed's preferred inflation gauge – and the official PMI prints from China, scheduled for release on the last day of the week.