AUD/USD remains on the defensive around mid-0.7300s

• AUD/USD edged lower for the second consecutive session, though lacked any follow-through selling.
• COVID-19 jitters weighed on the perceived riskier aussie; weaker USD helped limit any deeper losses.

The AUD/USD pair remained depressed through the early North American session, albeit has managed to recover around 20 pips from daily lows and was last seen trading near mid-0.7300s.

The pair extended Friday's modest pullback from the vicinity of the 0.7400 mark and edged lower on the first day of a new trading week. This marked the second consecutive day of a negative move and was sponsored by growing worries about the fast-spreading Delta variant of the coronavirus.

Despite a weeks-long stay-at-home order, Australia's most populous state of New South Wales reported a rise in new COVID-19 cases on Monday. Apart from this, weekend protests in the country's largest cities fueled concerns about new infections, which could result in an extension of restrictions.

The ongoing spread of COVID-19 took its toll on the global risk sentiment, which was evident from a generally softer tone around the equity markets. This exerted some additional pressure on the perceived riskier aussie, though weaker US dollar helped limit losses for the AUD/USD pair.

The risk-off impulse in the markets triggered a sharp fall in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond reversed a major part of the last week's gains to the 1.30% threshold and prompted some fresh selling around the greenback.

Meanwhile, the AUD/USD pair's inability to capitalize on last week's goodish bounce from YTD lows suggests that the near-term bearish trend might still be far from being over. That said, investors might refrain from placing aggressive bets ahead of the FOMC meeting, starting Tuesday.

The Fed's monetary policy update will play a key role in influencing the near-term USD price dynamics and provided a fresh directional impetus to the AUD/USD pair. In the meantime, developments surrounding the coronavirus saga will be looked upon for some trading opportunities.

Technical levels to watch