AUD/USD consolidates in a narrow range above mid-0.6900s, US CPI awaited

• AUD/USD lacks any firm intraday direction and oscillates in a narrow range on Tuesday.
• Recession fears seem to cap the risk-sensitive Aussie, though a weaker USD lends support.
• Traders keenly await the US consumer inflation data for January before placing fresh bets.

The AUD/USD pair struggles to capitalize on the previous day's goodish rebound from sub-0.6900 levels and oscillates in a narrow band through the early European session on Tuesday. Spot prices remain below the 0.7000 psychological mark, though the downside remains cushioned amid some follow-through US Dollar selling.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, moves further away from a multi-week high touched on Monday amid the ongoing decline in the US Treasury bond yields. That said, looming recession risks hold back traders from placing aggressive bets around the risk-sensitive Aussie and keep a lid on any meaningful upside for the AUD/USD pair, at least for the time being.

Traders also seem reluctant amid expectations that the Federal Reserve will stick to its hawkish stance for longer. The bets were reaffirmed by data released on Friday, which showed that consumer prices rose in December instead of falling as estimated previously. Adding to this, the University of Michigan survey's one-year inflation expectations jumped to 4.2% this month from 3.9% in January.

Hence, the market focus will remain glued to the latest US consumer inflation figures, due for release later during the early North American session. The crucial US CPI report will play a key role in influencing the Fed's rate-hike path, which, in turn, should drive the USD demand in the near term. This, along with broader risk sentiment, should provide some meaningful impetus to the AUD/USD pair.

Heading into the key US data risk, a more hawkish outlook by the Reserve Bank of Australia (RBA) might continue to act as a tailwind for the AUD/USD pair. In fact, the minutes of the RBA monetary policy meeting held in February signalled that further rate increases will be needed to ensure that inflation returns to target. This could lead to an extension of subdued range-bound price action.

Technical levels to watch