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• AUD/USD fills a modest gap down opening on Monday, though lacks follow-through.
• A downtick in the US bond yields weighs on the USD and lends support to the major.
• Recession fears act as a headwind for the pair ahead of this week’s key event/data risks.

The AUD/USD pair struggles to capitalize on its modest intraday bounce and remains on the defensive, just above mid-0.6700s through the early European session on Monday.

Chinese government officials over the weekend set a lower-than-expected target of 5% GDP growth for the current year and undermined expectations of a strong recovery in the world's second-largest economy. This leads to a modest gap-down opening for the China-proxy Australian Dollar, though a softer tone surrounding the US Dollar assists the AUD/USD pair to attract some buying around the 0.6740 region. A modest downtick in the US Treasury bond yields is seen as a key factor that keeps the USD bulls on the defensive on Monday.

That said, the prospects for a further policy tightening by the Federal Reserve act as a tailwind for the US bond yields and the Greenback, which, in turn, seems to cap the upside for the AUD/USD pair. The markets seem convinced that the US central bank will stick to its hawkish stance and continue raising rates for longer to tame stubbornly high inflation. In fact, the incoming US macro data indicated that inflation isn't coming down quite as fast as hoped and pointed to an economy that remains resilient despite rising borrowing costs.

Furthermore, a slew of FOMC policymakers recently backed the case for higher rate hikes and opened the door for a 50 bps lift-off at the March policy meeting.  Apart from this, looming recession risks favor the USD bulls and suggest that the path of least resistance for the AUD/USD pair is to the downside. Traders, however, seem reluctant to place aggressive bets ahead of this week's key central bank event risks - the Reserve Bank of Australia (RBA) meeting and Fed Chair Jerome Powell's two-day semi-annual congressional testimony.

Investors this week will also confront the release of the closely-watched US monthly employment details, popularly known as the NFP report on Friday. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair. Heading into the key event/data risks, spot prices seem more likely to prolong the recent range-bound price action witnessed over the past week or so and remain below a technically significant 200-day Simple Moving Average (SMA).
 

Technical levels to watch

AUD/USD

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