AUD/USD struggles to capitalize on modest intraday gains, fails ahead of 0.6700 mark

• AUD/USD struggles to capitalize on its modest intraday uptick to the 0.6700 neighbourhood.
• The ongoing rally in the US bond yields helps revive the USD demand and acts as a headwind.
• The RBA’s dovish tilt continues to cap ahead of the key Australian CPI report on Wednesday.

The AUD/USD pair regains some positive traction on Tuesday, albeit struggles to capitalize on the move and fails just ahead of the 0.6700 round-figure mark. The pair, however, sticks to modest intraday gains through the first half of the European session and is currently trading around the 0.6670-0.6675 area, still up over 0.35% for the day.

Receding fears of a full-blown banking crisis remain supportive of a generally positive risk tone, which, in turn, continues to weigh on the safe-haven US Dollar (USD) and benefits the risk-sensitive Australian Dollar. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. Furthermore, regulators reassured that they stood ready to address any liquidity shortfalls helped reverse the recent negative sentiment and boosted investors' confidence.

This, along with the fact that the Federal Reserve toned down its aggressive approach to reining in inflation, keeps the USD bulls on the defensive and acts as a tailwind for the AUD/USD pair. It is worth recalling that the US central bank sounded cautious about the outlook and signalled last week that a pause to interest rate hikes was on the horizon. The Aussie further draws support from mostly in-line domestic data, which showed that Retail Sales grew 0.2% MoM in February and indicated some economic resilience.

The aforementioned fundamental backdrop supports prospects for some meaningful appreciating move for the AUD/USD pair. That said, expectations that the Reserve Bank of Australia (RBA) will refrain from raising interest rates at its April policy meeting might hold back bulls from placing aggressive bets or positioning for further gains. Traders also seem reluctant and might prefer to move to the sidelines ahead of the release of the Australian consumer inflation figures, due during the Asian session on Wednesday.

In the meantime, Tuesday's US economic docket - featuring the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index - might provide some impetus to the AUD/USD pair. This, along with the US bond yields and the broader risk sentiment, might influence the USD and allow traders to grab short-term trading opportunities. The focus will then shift to the final US Q4 GDP print on Thursday and the Fed's preferred inflation gauge - the US Core PCE Price Index on Friday.

Technical levels to watch