AUD/USD flat-lines above mid-0.6600s, awaits US ISM PMI ahead of RBA on Tuesday

• AUD/USD oscillates in a narrow trading band through the early European session on Monday.
• A goodish pickup in the USD demand is seen as a key factor acting as a headwind for the pair.
• The downside seems limited ahead of the RBA on Tuesday and this week’s key US macro data.

The AUD/USD pair struggles for a firm direction on the first day of a new week and seesaws between tepid gains/minor losses through the early European session. Spot prices currently trade just above mid-0.6600s, nearly unchanged for the day, though manage to hold comfortably above a nearly four-week low touched last Thursday.

The US Dollar (USD) regains positive traction and reverses a major part of its Friday's downfall, which, in turn, is seen as a key factor acting as a headwind for the AUD/USD pair. Data released from the US on Friday showed that the PCE Price Index remains well above the Federal Reserve's 2% target and supports prospects for further policy tightening. Moreover, Fed Chair Jerome Powell reiterates last week that borrowing costs may still need to rise as much as 50 bps by the end of this year. This remains supportive of elevated US Treasury bond yields, which continue to underpin the Greenback and keep a lid on the major.

Apart from this, worries about a global economic downturn, particularly in China, further contribute to capping the upside for the Aussie. The official data published by the country’s National Bureau of Statistics (NBS) this Monday showed China's Manufacturing PMI came in at 50.5 in June as compared to the 50.2 anticipated. This, however, is below May's reading of 50.9% and does little to ease worries about slowing growth in the world's second-largest economy. The downside for the AUD/USD pair, however, remains cushioned, at least for now, as traders await important US macro data and the central bank event risk.

A rather busy week kicks off with the release of the US ISM Manufacturing PMI, due later during the North American session. This will be followed by the Reserve Bank of Australia (RBA) monetary policy decision on Tuesday. The focus, however, will remain glued to the FOMC meeting minutes on Wednesday and the closely-watched US monthly employment details - popularly known as the NFP report on Friday. This will play a key role in influencing the USD and provide a fresh directional impetus to the AUD/USD pair.

Technical levels to watch