- COVID-19 jitters weighed on AUD/USD for the second consecutive session on Monday.
- A sharp fall in the US bond yields undermined the USD and might help limit the downside.
The AUD/USD pair traded with a mild negative bias through the early European session and was last seen hovering near the lower end of its daily trading range, around mid-0.7300s.
The pair extended the previous session's pullback from the vicinity of the 0.7400 mark and edged lower for the second consecutive day amid the risk-off impulse in the markets. Worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus dented investors appetite for riskier assets. This was evident from a generally weaker tone around the equity markets, which was seen as a key factor that drove flows away from the perceived riskier aussie.
Meanwhile, the global flight to safety triggered a sharp pullback in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond reversed a major part of the last week's gains to the 1.30% threshold. This, in turn, prompted some fresh selling around the US dollar and extended some support to the AUD/USD pair. Apart from this, traders' reluctance to place any aggressive bets ahead of the FOMC meeting might also help limit losses for the pair.
The Fed is scheduled to announce its latest monetary policy decision during the US session on Wednesday. The outcome will play a key role in influencing the near-term USD price dynamics and provided a fresh directional impetus to the AUD/USD pair. In the meantime, developments surrounding the coronavirus saga will drive the broader market risk sentiment and allow traders to grab some short-term opportunities amid absent relevant market-moving economic releases.