• AUD/USD kicks off the new week on a subdued note ahead of key central bank event risks.
• The divergent RBA-Fed policy expectations continue to act as a tailwind for spot prices.
• Traders now look forward to China’s Trade Balance data to grab short-term opportunities.

The AUD/USD pair enters a bullish consolidation phase at the start of a new week and oscillates in a narrow range near its highest level since September 16, touched on Friday. Spot prices currently trade around the 0.6640 region as traders look to China's Trade Balance data for some impetus ahead of this week's key central bank event risks.

The Reserve Bank of Australia (RBA) is scheduled to announce its policy decision on Tuesday and is widely expected to leave interest rates unchanged and keep focus on taming inflation. In fact, RBA Governor Michele Bullock admitted last week that inflation is not yet sustainably back within the central bank's 2% to 3% annual target band. Furthermore, Australia's economy grew at its fastest annual pace in two years, which, along with a strong labour market, fueled speculations that the RBA will instead hike interest rates next year. This marks a significant divergence in comparison to dovish US Federal Reserve (Fed) expectations, which keeps the US Dollar (USD) bulls on the defensive and acts as a tailwind for the AUD/USD pair.

The recent US macro data pointed to a gradual cooling of the economy, which, along with comments from several Fed officials, suggests that another interest rate cut in December is all but certain. According to the CME Group's FedWatch Tool, traders are currently pricing in a nearly 90% chance that the US central bank will cut interest rates by 25-basis-points (bps) on Wednesday. Traders, however, opt to wait for more cues about the Fed's rate-cut path before placing fresh directional bets, which, in turn, leads to the AUD/USD pair's subdued price action during the Asian session. Hence, the market focus will remain glued to the updated economic projections and Fed Chair Jerome Powell's comments during the post-meeting press conference.

In the meantime, China's Trade Balance data could provide some impetus to the Australian Dollar (AUD) and the currency pair. Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favor of bullish traders and suggests that the path of least resistance for the AUD/USD pair remains to the upside. Hence, any meaningful corrective pullback could be seen as a buying opportunity and is more likely to remain cushioned.