Since the beginning of March, the Aussie/USD has lacked strong directional conviction and has mostly traded sideways, with the exchange rate operating perfectly within a lateral channel - a clear sign of consolidation before the next explosive move.

Range-bound markets are sometimes predictable and easy to trade, but the whole premise is to take a long position when the price of the underlying asset moves towards support in anticipation of a rebound or shorting resistance in preparation for a possible pullback.

Looking at the daily chart of the Aussie, the range-trading strategy should have been effective recently as the pair has held the upper (0.6800) and lower (0.6500) of the range, where it has been stuck for more than two months. While the setting may still be in effect, caution is needed, with volatility set to spike in the coming days due to a high-impact event on the economic calendar: the U.S. CPI report for April.

The release of US inflation data at 8:30 am ET on Wednesday is likely to trigger wild swings in the forex market, so traders should exercise restraint when trading and, more importantly, watch price action to better predict near-term market movements.

As far as possible, if AUD/USD is rejected by resistance at 0.6800, the 200-day simple moving average and the uptrend line extended from the October 2022 low should fend off the bears, but if a decisive break is made, sellers are likely to move up to the 2023 low near 0.6575.

Alternatively, if price action consolidates upward and breaks through resistance at 0.6800 outright, more buyers may step in, creating the right conditions for a rebound to 0.6880. If it strengthens further, the focus will shift to the higher dynamic resistance level of 0.7000.