AUD/USD languishes near its lowest level since January, holds just above 0.6700 mark

• AUD/USD drops to a fresh low since January, though shows some resilience below the 0.6700 mark.
• A positive risk tone prompts some USD profit-taking and lends support to the risk-sensitive Aussie.
• Bets for more rate hikes by the Fed, elevated US bond yields limit the USD slide and cap the major.

The AUD/USD pair kicks off the new week on a weaker note and drops to a fresh low since January 6, though manages to recovery a few pips from sub-0.6700 levels. The pair is currently placed around the 0.6715-0.6720 region, down over 0.10% for the day, and remains at the mercy of the US Dollar price dynamics.

A goodish recovery in the US equity futures prompts some profit-taking around the safe-haven Greenback and seems to benefit the risk-sensitive Aussie. That said, the prospects for further policy tightening by the Federal Reserve keep the US Treasury bond yields elevated, which, in turn, helps limit losses for the USD and continues to weigh on the AUD/USD pair.

The markets now seem convinced that the US central bank will stick to its hawkish stance for longer and the bets were reaffirmed by the stronger US PCE Price Index data released on Friday. Furthermore, the recent upbeat US macro data point to an economy that remains resilient despite rising borrowing costs and should allow the Fed to continue hiking rates.

Investors, meanwhile, remain worried about economic headwinds stemming from a hawkish stance adopted by major central banks. Apart from this, geopolitical tensions should keep a lid on any optimistic move in the markets, at least for now, and favour the USD bulls. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside.

Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and Pending Home Sales data. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the major.

Technical levels to watch