AUD/USD oscillates in a range around 100-day SMA, just below mid-0.6700s/one-month peak

• AUD/USD consolidates its recent strong gains to a one-month top touched on Friday.
• Worries about the slowing global economy and modest USD strength cap the major.
• The RBA’s hawkish outlook acts as a tailwind ahead of this week’s data/event risks.

The AUD/USD pair enters a bullish consolidation phase on the first day of a new week and oscillates in a narrow trading band, just below mid-0.6700s or a one-month high touched on Friday. Bulls still await a sustained strength beyond the 100-day Simple Moving Average (SMA) before placing fresh bets and positioning for an extension of the recent upward trajectory witnessed since the beginning of the current month.

The Reserve Bank of Australia's (RBA) surprise 25 bps rate hike last week and a more hawkish policy statement continue to underpin the Australian Dollar (AUD). In fact, RBA Governor Lowe on Wednesday defended the move to lift the benchmark rates above 4% for the first time in nearly 12 years and reiterated that interest rates may need to rise further in order to curb overheated inflation. This, in turn, acts as a tailwind for the AUD/USD pair, though a combination of factors is holding back bulls from placing aggressive bets and capping the upside, at least for the time being.

Growing worries about a global economic downturn, particularly in China, assists the safe-haven US Dollar (USD) to gain some follow-through positive traction for the second straight day and caps gains for the China-proxy Aussie. Any further USD move up, meanwhile, seems limited in the wake of the uncertainty over the Federal Reserve's (Fed) next policy move. In fact, the recent dovish rhetoric by Fed officials reaffirmed expectations for an imminent pause in the US central bank's policy tightening cycle. The markets, however, are still pricing in the possibility of another 25 bps lift-off in July.

Hence, the focus will remain glued to the outcome of the highly-anticipated two-day FOMC monetary policy meeting, scheduled to be announced on Wednesday. Investors will look for fresh clues about the Fed's near-term policy outlook, which will play a key role in influencing the USD price dynamics and determine the next leg of a directional move for the AUD/USD pair. Heading into the key central bank event risk, the release of the US consumer inflation figures on Tuesday should infuse some volatility in the markets and produce short-term trading opportunities around the major.

Technical levels to watch