AUD/USD retreats further from post-RBA swing high, flirts with 0.7150 support zone

• AUD/USD struggled to capitalize on a hawkish RBA-inspired intraday bullish spike.
• A softer risk tone, elevated US bond yields underpinned the USD and capped gains.
• The market focus will remain glued to the US consumer inflation figures on Friday.

The AUD/USD pair witnessed an intraday turnaround from the vicinity of mid-0.7200s and drifted into negative territory for the third successive day on Tuesday. The downward trajectory extended through the early North American session and dragged spot prices to a three-day low, around the 0.7155 region in the last hour.

The Australian dollar strengthened after the Reserve Bank of Australia (RBA) raised interest rates by 0.50% (more-than-expected) on Tuesday and indicated that further tightening is in the pipeline. The initial market reaction, however, turned out to be short-lived amid the prevalent bullish sentiment surrounding the US dollar.

Expectations that a more aggressive move by major central banks to constrain inflation could pose challenges to the global economic growth continued weighing on investors' sentiment. This was evident from a weaker tone around the equity markets, which, along with elevated US Treasury bond yields, underpinned the safe-haven buck.

Investors remain concerned that global supply chain disruption caused by the Russia-Ukraine war would push consumer prices even higher. This might force the US central bank to tighten its monetary policy at a faster pace, which, in turn, assisted the yield on the benchmark 10-year US government bond to hold steady above the 3.0% threshold.

Hence, the market focus will remain glued to the latest US consumer inflation figures, due for release on Friday. The US CPI report might influence the Fed's tightening path and the USD price dynamics. This, in turn, would provide a fresh impetus to the AUD/USD pair and help determine the next leg of a directional move.

In the meantime, the US bond yields will continue to play a key role in driving the USD demand amid absent top-tier US economic data on Tuesday. Apart from this, traders will take cues from the broader market risk in order to grab short-term opportunities around the AUD/USD pair.

Technical levels to watch