• AUD/USD drifts lower as weak Australian consumer sentiment backs March RBA pause.
• The Fed-inspired USD weakness could support the major amid the risk-on environment.
• Traders now look to U.S. retail sales and speeches from Fed officials for a fresh impetus.

The AUD/USD pair attracts some sellers on Tuesday, eroding part of the previous day's strong move up to the 0.7100 mark or a three-year high and snapping a two-day winning streak. Spot prices slide to a fresh daily low, around the 0.7065 area, during the early European session, though the broader fundamental backdrop warrants some caution before positioning for deeper losses.

Westpac and the Melbourne Institute’s consumer sentiment index fell for the third month, reflecting pressure on household spending and strengthening the case for the Reserve Bank of Australia (RBA) to pause in March. This, in turn, prompts profit-taking around the Australian Dollar (AUD) and exerts some downward pressure on the AUD/USD pair. Meanwhile, traders are still pricing in the possibility of an RBA rate hike in May amid sticky inflation, which, along with the upbeat market mood, could limit losses for the risk-sensitive Aussie.

The US Dollar (USD), on the other hand, remains depressed amid the growing acceptance that the US Federal Reserve (Fed) will lower borrowing costs at least two more times in 2026. Adding to this, concerns about the central bank's independence keep the USD bulls on the defensive. Furthermore, signs of easing tensions in the Middle East further undermine the Greenback's safe-haven status amid the broader de-dollarization trend. This backs the case for the emergence of some dip-buyers around the AUD/USD pair and warrants caution for bears.

Market participants now look to Tuesday's release of the monthly US Retail Sales data, which, along with Fedspeak, would drive the USD later during the North American session. The focus, however, will remain glued to the closely-watched US employment details – popularly known as the Nonfarm Payrolls (NFP) on Wednesday. Apart from this, the US consumer inflation figures on Friday should provide more cues about the Fed's rate-cut path. This, in turn, will influence the USD price dynamics and provide some meaningful impetus to the AUD/USD pair.