AUD/USD struggles for direction, stuck in a range below 0.7300 mark

• AUD/USD was seen oscillating in a range through the early European session on Monday.
• Sustained selling around the USD, the risk-on mood extended some support to the major.
• Worsening US-China relations should cap gains ahead of this week’s central bank events.

The AUD/USD pair lacked any firm directional bias and remained confined in a narrow trading band, below the 0.7300 mark through the early European session on Monday.

The pair failed to capitalize on last week's goodish bounce from sub-0.7200 levels, or the lowest level in two weeks and witnessed a subdued/range-bound price action on the first day of a new trading week. The downside remains cushioned on the back of the prevalent selling bias surrounding the US dollar, weighed down by fading prospects for the next round of the US fiscal stimulus measures.

Apart from this, the upbeat market mood further undermined the greenback's relative safe-haven status and extended some support to the AUD/USD pair. The global risk sentiment got a strong boost from news that AstraZeneca resumed the phase-3 trials for its COVID-19 vaccine candidate. Moreover, Pfizer also announced the likelihood of presenting late-stage data for its own vaccine by late October.

However, a growing diplomatic spat between the US and China held bulls from placing any aggressive bets. In the latest developments, China announced that Beijing has sent a note detailing reciprocal restrictions on the US Embassy and consulates on Friday. The move comes in response to US sanctions on Chinese individuals, which, in turn, fueled worries about worsening US-China relations.

Investors also seemed reluctant to place any aggressive bets as the focus remains centred on this week's central bank events. The RBA is scheduled to release the minutes of its recent meeting on Tuesday, which might influence the aussie. This, coupled with the outcome of a two-day FOMC meeting, will play a key role in determining the AUD/USD pair's next leg of a directional move.

Technical levels to watch

AUD/USD