AUD/USD STRUGGLES FOR A FIRM INTRADAY DIRECTION, FLAT LINES ABOVE 0.6500 MARK

• AUD/USD oscillates in a range on Monday and is influenced by a combination of diverging forces.
• Hopes for additional stimulus from China lends support to the Aussie amid subdued USD demand.
• The cautious market mood caps gains amid bets that the RBA will not hike interest rates further.

The AUD/USD pair lacks any firm intraday direction on the first day of a new week and seesaws between tepid gains/minor losses through the first half of the European session. Spot prices currently trade around the 0.6520-0.6525 area, unchanged for the day and remain well within the striking distance of a nearly three-week low touched last Thursday.

Traders opt to wait on the sidelines ahead of the Federal Reserve (Fed) Chair Jerome Powell's congressional testimony on Wednesday and Thursday, which might provide cues about the rate-cut path and influence the US Dollar (USD). Apart from this, important US macro data scheduled at the beginning of a new month, including the closely-watched Nonfarm Payrolls (NFP) on Friday, should provide a fresh directional impetus to the AUD/USD pair.

In the meantime, Friday's disappointing release of the US ISM Manufacturing PMI and the University of Michigan’s Consumer Sentiment Index, along with less-hawkish remarks by Fed officials, reaffirmed bets for a June rate cut. This keeps the USD bulls on the defensive and acts as a tailwind for the AUD/USD pair. Apart from this, hopes for additional stimulus measures from China turn out to be another factor lending some support to the Australian Dollar (AUD).

That said, a slight deterioration in the global risk sentiment – as depicted by a softer tone around the US equity futures – holds back traders from placing aggressive bullish bets around the risk-sensitive Aussie. Apart from this, growing acceptance that the Reserve Bank of Australia (RBA) will not hike rates further, bolstered by last week's rather unimpressive domestic inflation figures and weaker Retail Sales data, contributes to capping the upside for the AUD/USD pair.

Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom and positioning for any meaningful appreciating move. In the absence of any relevant US macro data on Monday, the US bond yields will play a key role in driving the USD demand. Apart from this, the broader risk sentiment should influence the USD price dynamics and produce short-term opportunities around the AUD/USD pair.