AUD/USD flirts with daily low, just below 0.6300 mark amid resurgent USD demand

• AUD/USD surrenders its modest gains amid the emergence of fresh USD buying.
• Aggressive Fed rate hike bets, elevated US bond yields offer support to the buck.
• The risk-on mood limits the downside for the risk-sensitive aussie, at least for now.

The AUD/USD pair struggles to capitalize on its modest intraday uptick and attracts fresh sellers near the 0.6330 area on Tuesday. Spot prices retreat below the 0.6300 round-figure mark during the first half of the European session, with bears now awaiting a sustained break through the 100-hour SMA support.

Elevated US Treasury bond yields assist the US dollar to stage a goodish bounce from over a one-week low, which turns out to be a key factor exerting some pressure on the AUD/USD pair. Investors seem convinced that the Federal Reserve will continue to tighten its monetary policy at a faster pace to tame inflation. The current market pricing suggests a nearly 100% chance for another supersized 75 bps Fed rate hike in November. This, in turn, continues to act as a tailwind for the US bond yields and the greenback.

That said, a V-shaped recovery in the global equity markets is holding back traders from placing fresh bets around the safe-haven buck and offering support to the risk-sensitive aussie. Any meaningful upside, meanwhile, remains elusive amid the Reserve Bank of Australia's (RBA) decision to slow the pace of policy tightening earlier this month. Furthermore, the RBA minutes released this Tuesday showed that policymakers opted to reduce the size of the rate hike and wait to see the impact of the recent tightening on household spending.

Furthermore, recession fears - amid concerns about the economic headwinds stemming from rapidly rising borrowing costs, geopolitical risks and China's strict zero-COVID policy - could keep a lid on the latest optimism. 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 Industrial Production data and Capacity Utilization Rate for a fresh impetus later during the early North American session.

The focus, however, will be on a slew of important Chinese macro data, due on Wednesday, which will play a key role in influencing the sentiment surrounding the China-proxy Australian dollar. Apart from this, Thursday's release of the monthly employment details from Australia should help investors to determine the next leg of a directional move for the AUD/USD pair.

Technical levels to watch