AUD/USD struggles for direction, stuck in a range around mid-0.7300s

• AUD/USD lacked any firm directional bias and remained confined in a range on Wednesday.
• A combination of factors extended some support to the USD and capped gains for the major.
• Bulls shrugged off slightly stronger Australian CPI as the focus remains on FOMC decision.

The AUD/USD pair extended its sideways consolidative price action and remained confined in a narrow trading band, around mid-0.7300s heading into the European session.

The pair, so far, has been struggling to register any meaningful recovery and oscillating in a range over the past one week or so. Given the recent fall to the lowest level since November 2020, this might still be categorized as a bearish consolidation phase as investors await a fresh catalyst before placing any directional bets.

Hence, the key focus will remain on the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced later during the US session. Market participants will look for a clear answer to the crucial question of when the tapering will start, which, in turn, will play a key role in influencing the US dollar in the near term.

In the meantime, the shaky risk sentiment extended some support to the safe-haven USD and acted as a headwind for the perceived riskier aussie. Worries about the economic fallout from the fast-spreading Delta variant of the coronavirus, along with China's regulatory crackdown, has sent ripples through the global equity markets.

Apart from this, the greenback was further supported by a modest uptick in the US Treasury bond yields. The combination of factors, to a larger extent, offset slightly better-than-expected Australian consumer inflation figures. In fact, the headline CPI rose 0.8% during the second quarter, though did little to impress bullish traders.

From a technical perspective, the AUD/USD pair's inability to gain any meaningful traction clearly suggests that the near-term bearish trend might still be far from being over. Hence, any meaningful upside back towards the 0.7400 mark might be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Technical levels to watch