• AUD/USD rallies over 100 pips intraday and touches a nearly one-month high on Monday.
• The risk-on mood weighs on the safe-haven USD and benefits the risk-sensitive Aussie.
• Traders now look to the US ISM PMI for some impetus ahead of the RBA on Tuesday.

The AUD/USD pair rebounds sharply from a four-day high, around the 0.6650 area touched earlier this Monday and builds on its solid intraday recovery through the mid-European session. Spot prices spike to the 0.6760 area, or a nearly one-month top in the last hour, with bulls making a fresh attempt to build on the momentum further beyond a technically significant 200-day Simple Moving Average (SMA).

As investors digest the potential inflationary impact of a sharp rise in Oil prices, the prevalent risk-on environment attracts fresh sellers around the safe-haven US Dollar (USD) and turns out to be a key factor that benefits the risk-sensitive Aussie. Apart from this, the AUD/USD pair's strong intraday rally could further be attributed to some short-covering ahead of the Reserve Bank of Australia (RBA) monetary policy meeting on Tuesday. The market optimism, however, is likely to be short-lived amid concerns about a deeper global economic downturn.

The worries resurfaced after data out of Asia on Friday showed that manufacturing activity in Japan contracted during March, while growth in China stalled during the reported month. Furthermore, fresh speculations that rising energy prices might force the Federal Reserve (Fed) to move back to its inflation-fighting rate hikes, which, in turn, favour the USD bulls and might cap the AUD/USD pair. the markets are now pricing in a greater chance of a 25 bps lift-off in May and the bets were lifted by a surprise production cut by OPEC+.

Hence, it will be prudent to wait for a strong follow-through buying around the AUD/USD pair before positioning for a further near-term appreciating move. Heading into the key central bank event risk, traders on Monday will take cues from the US ISM Manufacturing PMI, due later during the early North American session. This week's busy US economic docket also features the ADP report on private-sector employment and ISM Services PMI on Wednesday, followed by the crucial US monthly employment report - popularly known as NFP on Friday.

Technical levels to watch