AUD/USD fades a bounce to 0.7275 as US dollar recovers ground

• AUD/USD off the highs despite risk rebound, strong Aussie jobs.
• DXY rebounds as yields pause the pullback, PBOC eases policy further
• Surging covid cases in Australia and Fed-RBA divergence to cap the upside.

AUD/USD is retreating towards 0.7250, having hit a fresh four-day high of 0.7276 in the last hours.

Resurgent US dollar demand across the board is hurting the commitment of the buyers, as the Treasury yields pause their corrective pullback from two-year highs. The US dollar index rises to 95.60, as of writing, up 0.09% on the day.

The aussie spiked to multi-day highs, earlier on, after the US stocks rebounded and fuelled risk recovery across markets, boosting the high-beta currency AUD.

Strong Australian labor market report for December combined with the Chinese central bank’s (PBOC) cuts to the mortgage lending rates add to the bullish sentiment around the aussie pair.

The Australian Unemployment Rate dropped to a 13-year low of 4.25 in the reported period, fanning speculation that the Reserve Bank of Australia (RBA) could end its bond-buying program and bring forward cash rate hikes.

The further upside for AUD/USD could remain elusive amid divergent monetary policy outlooks between the Fed and RBA. Meanwhile, the continuous rise in COVID-19 infection in the most populous state of Australia, New South Wales (NSW), also remains a concerning factor for aussie bulls.

Traders also weigh in the growing risks surrounding the Russia-Ukraine crisis and US President Joe Biden's comments on the US-China trade tariffs.

AUD/USD: Additional levels to consider