• AUD/USD oscillated in a narrow trading band through the early part of the European session.
• Hawkish Fed expectations, rising US bond yields underpinned the USD and capped the upside.
• Investors, however, seemed reluctant to place aggressive bets ahead of the key US CPI report.

The AUD/USD pair seesawed between tepid gains/minor losses through the early part of the European session and was last seen trading around mid-0.7100s.

Following the overnight pullback from a nearly two-week high, the AUD/USD pair witnessed a range-bound price action on Friday as investors await the US consumer inflation figures for a fresh impetus. The US CPI report is due for release later during the early North American session and will be looked upon for fresh clues about the Fed's near-term policy outlook.

The markets have been pricing in the prospects for an early policy tightening by the Fed amid worries about the persistent rise in inflationary pressures. A stronger print will reaffirm the hawkish Fed expectations, which, in turn, would result in a stronger US dollar and suggests that the AUD/USD pair's recent recovery from the YTD low has run out of steam.

In the meantime, the USD drew some support from a fresh leg up in the US Treasury bond yields. Apart from this, a generally weaker tone around the equity markets further benefitted the greenback's safe-haven status. Heading into the key data risk, the combination of factors might continue to cap any meaningful upside for the perceived riskier aussie.

Technical levels to watch