AUD/USD consolidates in a range near weekly top, just below 0.7180 resistance zone

• AUD/USD witnessed a subdued/range-bound price move heading into the European session.
• COVID-19 jitters, dovish remarks by RBA Governor Lowe acted as a headwind for the major.
• The risk-on mood, weaker USD extended some support and helped limit any meaningful slide.

The AUD/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the early part of the trading on Thursday. The pair was last seen hovering in the neutral territory, around the 0.7165 region heading into the European session.

The pair, so far, has struggled to capitalize on the previous day's post-FOMC rebound from the 0.7090 support area and the upside remained capped near the 0.7180 resistance zone. A sharp rise in daily coronavirus cases in Australia's largest state by population – New South Wales – and dovish comments by the RBA Governor Philip Lowe acted as a headwind for the Australian dollar.

In fact, New South Wales reported 1,742 new cases of COVID-19 on Thursday – the highest daily total since the pandemic began. The RBA Governor Philip Lowe also acknowledge the economic risks from the Omicron outbreak and pushed back against expectations for a rate hike in 2022. This overshadowed upbeat employment figures from Australia and capped gains for the AUD/USD pair.

That said, a generally positive tone around the equity markets extended some support to the perceived riskier aussie. Apart from this, a modest US dollar weakness helped limit any meaningful slide for the AUD/USD pair, at least for now. It, however, remains to be seen if bulls are able to regain control or refrain from placing aggressive bets amid a more hawkish Fed outlook.

It is worth recalling that the Fed on Wednesday announced that it would double the pace of tapering to $30 billion per month. Moreover, the so-called dot plot showed that officials expect to raise the fed funds rate at least three times next year. This, in turn, supports prospects for the emergence of some USD dip-buying, which, in turn, should continue to cap gains for the AUD/USD pair.

Market participants now look forward to the US economic docket, featuring the release of the Initial Weekly Jobless Claims, Philly Fed Manufacturing Index, Industrial Production and flash PMIs. This, along with some volatility infused by the BoE/ECB policy decision and the broader market risk sentiment, should provide some impetus to the AUD/USD pair.

Technical levels to watch