AUD/USD remains depressed below 0.6700, just above daily low amid modest USD strength

• AUD/USD drifts lower on Wednesday and is pressured by a combination of factors.
• The softer Australian CPI lifts RBA rate pause bets and weighs heavily on the Aussie.
• Rising US bond yields revive the USD demand and further contribute to the decline.

The AUD/USD pair comes under some renewed selling pressure on Wednesday and reverses a major part of the previous day's positive move. The pair maintains its offered tone through the early North American session and is currently placed near the lower end of its daily range, around the 0.6670-0.6660 region.

The Australian Dollar started losing ground in reaction to the softer-than-expected domestic consumer inflation figures, which fuels speculation that the Reserve Bank of Australia (RBA) could pause its rate-hiking cycle at the April meeting. In fact, the Australian Bureau of Statistics (ABS) reported that the headline CPI decelerated from the previous month's reading of 7.4% to 6.8% in the year to February, marking the slowest rise since June 2022. This, along with a modest pickup in the US Dollar (USD) demand, is seen exerting some downward pressure on the AUD/USD pair.

Having registered losses over the past two days, the USD regains some positive traction amid a further rise in the US Treasury bond yields. Easing fears of a full-blown banking crisis continues to push the US bond yields higher. That said, the Federal Reserve's less hawkish outlook could act as a headwind for the US bond yields and the Greenback. It is worth recalling that the US central bank last week toned down its approach to reining in inflation and signalled that a pause to interest rate hikes was on the horizon in the wake of the recent turmoil in the banking sector.

Apart from this, the prevalent risk-on mood - as depicted by a strong opening rally around the US equity markets - could cap gains for the safe-haven buck and lend some support to the risk-sensitive Aussie. This, in turn, makes it prudent to wait for strong follow-through selling before positioning for any further depreciating move for the AUD/USD pair. Even from a technical perspective, the recent two-way price action witnessed over the past two weeks or so points to indecision over the next leg of a directional move and warrants some caution for bearish traders.

Technical levels to watch