AUD/USD bulls struggle to extend momentum further beyond 0.7200 handle

   •  Dovish Fed rate hike expectations kept the USD bulls on the defensive.
   •  Unresolved US-China trade disputes seemed to cap any further up-move.
   •  Focus now shifts to another round of US-China trade talks/FOMC meeting.

The AUD/USD pair added to Friday's sharp short-covering bounce from three-week lows, albeit seemed struggling to extend the momentum further beyond the 0.7200 handle.

Despite a deal to reopen the US government after a prolonged shutdown, growing market expectations that the Fed will signal a pause in their tightening cycle kept the US Dollar bulls on the defensive and pushed the pair higher at the start of a new trading week. 

Dovish Fed expectations were further reinforced by reports on Friday, indicating that the Fed is considering to stop shrinking its massive balance sheet earlier than anticipated, which was seen as one of the key factors continuing to weigh on the greenback.

The uptick, however, lacked any strong bullish conviction amid yet unresolved US-China trade disputes and hence, the key focus will be on the upcoming high-level US-China trade talks this week, which will play a key role in influencing sentiment around the China-proxy Australian Dollar.

This coupled with the latest FOMC monetary policy update, scheduled to be announced during the US trading session on Wednesday should provide some meaningful impetus and help investors determine the pair's next leg of a directional move.

Technical levels to watch

Immediate support is pegged near the 0.7165 level, below which the pair might turn vulnerable to slide further towards testing sub-0.7100 level with some intermediate support near the 0.7120 region. On the flip side, sustained move beyond the 0.7200 handle, leading to a subsequent breakthrough the 0.7225 supply zone, has the potential to lift the pair further towards reclaiming the 0.7300 round figure mark.