AUD/USD surrenders intraday gains to fresh YTD peak, hovers around 0.7500 mark

• AUD/USD witnessed modest intraday pullback from the fresh YTD top touched earlier this Friday.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the USD and acted as a headwind.
• Rising commodity prices continued lending support to the aussie and helped limit any further losses.

The AUD/USD pair extended its intraday retracement slide from the YTD top and dropped to sub-0.7500 levels or a fresh daily low during the first half of the European session.

The pair struggled to capitalize on its early gains and witnessed modest intraday pullback from the highest level since early November 2021, around the 0.7535 touched this Friday. The downtick could be attributed to the emergence of some dip-buying around the US dollar, which continued drawing support from the Fed's hawkish outlook.

In fact, influential FOMC members, including Fed Chair Jerome Powell, left the door open for a larger rise in borrowing costs to bring down unacceptably high inflation. Investors were quick to price in a 50 bps rate hike at the May meeting and pushed the yield on the benchmark 10-year US government bond back closer to the 22-month high.

Moreover, concerns that surging crude oil prices would continue to put upward pressure on consumer prices remained supportive of elevated US Treasury bond yields. This, in turn, acted as a tailwind for the buck and prompted some profit-taking around the AUD/USD pair, especially after the recent blowout rally of over 350 pips from the monthly low.

The downside, however, remains cushioned amid rising commodity prices, which continued lending some support to the resources-linked Australian dollar. Hence, it will be prudent to wait for strong follow-through selling before confirming that the AUD/USD pair has topped out in the near term and positioning for any meaningful corrective slide.

Nevertheless, the AUD/USD pair remains on track to post gains for the second successive week. Market participants now look forward to the US economic docket, featuring the release of revised Michigan Consumer Sentiment Index and Pending Home Sales data. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus.

Technical levels to watch