AUD/USD pares intraday gains, faces rejection near 0.6700 mark amid renewed USD buying

• AUD/USD gains some positive traction on Wednesday, albeit lacks follow-through.
• The risk-on impulse benefits the Aussie; a modest USD strength caps the upside.
• The fundamental backdrop supports prospects for a further depreciating move.

The AUD/USD pair struggles to capitalize on its modest intraday gains on Wednesday and faced rejection near the 0.6700 round-figure mark. The pair, however, sticks to a mildly positive bias through the early European session and is currently trading around the 0.6675-0.6680 region, just above the 100-day SMA support.

A goodish recovery in the global risk sentiment - as depicted by the upbeat tone around the equity markets - is seen as a key factor lending some support to the perceived riskier Aussie. That said, the emergence of some US Dollar buying keeps a lid on any meaningful upside for the AUD/USD pair and warrants some caution for bullish traders.

The USD draws some support from a modest uptick in the US Treasury bond yields, bolstered by the Fed's hawkish outlook. In fact, the US central bank indicated that it will continue to raise rates to crush inflation. Furthermore, the Bank of Japan's policy tweak, which triggered a sell-off in bond markets on Tuesday, act as a tailwind for the US bond yields.

Apart from this, worries about rising COVID-19 cases in China contribute to capping gains for the AUD/USD pair. This, along with dovish Reserve Bank of Australia (RBA) minutes released on Tuesday, showing that policymakers considered leaving rates unchanged at the December meeting, suggests that the path of least resistance for spot prices is to the downside.

Market participants now look forward to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index later during the early North American session. Traders will further take cues from the US bond yields and the broader risk sentiment, which will influence the USD price dynamics and provide some impetus to the AUD/USD pair.

Technical levels to watch