AUD/USD retreats from two-week high, on the back foot near 0.7400 mark

• AUD/USD pulled back from the two-week high touched earlier this Monday amid stronger USD.
• The Fed’s hawkish outlook, along with the caution mood benefitted the safe-haven greenback.
• Rising commodity prices extended some support to the aussie and helped limit deeper losses.

The AUD/USD pair edged lower heading into the European session and was last seen hovering near the lower end of its daily trading range, around the 0.7400 round-figure mark.

The pair witnessed a modest pullback from a two-week high, around the 0.7425 region touched earlier this Monday and for now, seems to have snapped four successive days of the winning streak. The cautious market mood was seen as a key factor that acted as a headwind for the perceived riskier aussie. This, along with the emergence of some US dollar buying exerted some downward pressure on the AUD/USD pair.

Despite hopes for a peace deal to end the war in Ukraine, investors remain on the edge amid the heavy aerial bombardment in the capital city Kyiv by Russian forces. This, in turn, kept a lid on the recent optimistic move in the markets and benefitted the safe-haven USD, which was further underpinned by the Fed's hawkish outlook. In fact, the Fed indicated that it could raise rates at all the six remaining meetings in 2022.

Adding to this, comments by influential FOMC members, along with elevated US Treasury bond yields, further inspired the USD bulls. St. Louis Fed President James Bullard explained why he voted for a 50 bps rate hike and said on Friday that the central bank’s reputation was on the line if it failed to act with sufficient urgency.

Adding to this, Fed Governor Christopher Waller noted that the war in Ukraine was the reason he didn’t push for a 50 bps rate hike, but that was definitely on the table for upcoming meetings. This helped the yield on the benchmark 10-year US government bond to hold steady just below the highest level since June 2019.

That said, rising commodity prices could extend some support to the resources-linked Australian dollar and cap gains for the AUD/USD pair. Moreover, investors might also refrain from placing aggressive bets and prefer to wait for Fed Chair Jerome Powell's scheduled speech, due later during the US session this Monday.

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