AUD/USD keeps the red below 0.6300, focus shifts to Australian jobs report on Thursday

• AUD/USD comes under renewed selling pressure on Wednesday amid resurgent USD demand.
• Aggressive Fed rate hike bets, surging US bond yields, the risk-off impulse lifts the greenback.
• Bears, however, remain on the sidelines ahead of the key Australian jobs report on Thursday.

The AUD/USD pair fails to capitalize on its modest recovery gains recorded over the past two trading sessions and meets with a fresh supply on Wednesday. The pair maintains its offered tone through the early North American session and is currently placed near the daily low, around the 0.6280-0.6275 region.

The US dollar makes a solid comeback in the wake of a breakout rally in the US Treasury bond yields and turns out to be a key factor exerting downward pressure on the AUD/USD pair. In fact, the benchmark 10-year Treasury note hits its highest level since 2008 and the yield on the rate-sensitive 2-year US government bond rallies to a new 15-year peak amid hawkish Fed expectations.

The markets seem convinced that the US central bank will stick to its aggressive policy tightening path to tame inflation and have been pricing in another supersized 75 bps rate hike in November. This, in turn, remains supportive of elevated US Treasury bond yields. This, along with the risk-off impulse, lifts the safe-haven buck and weighs on the risk-sensitive Australian dollar.

The market sentiment remains fragile amid growing worries about the economic headwinds stemming from rapidly rising borrowing costs, geopolitical risks and China's strict zero-COVID policy. The anti-risk flow is evident from a fresh leg down in the equity markets. This, to a larger extent, overshadows mixed US housing market data and does little to dent the intraday USD bullish move.

Apart from this, the Reserve Bank of Australia's (RBA) decision to slow the pace of policy tightening earlier this month suggests that the path of least resistance for the AUD/USD pair is to the downside. Hence, a subsequent slide back below the 0.6200 round-figure mark, towards challenging the YTD low near the 0.6170 region touched last week, looks like a distinct possibility.

That said, traders seem reluctant to place placing aggressive bearish bets and prefer to wait for the monthly employment details from Australia, due for release during the Asian session on Thursday. In the meantime, the USD price dynamics will continue to influence the AUD/USD pair, which, along with the broader risk sentiment, should allow traders to grab short-term opportunities.

Technical levels to watch