AUD/USD surrenders modest intraday gains, flirts with daily low around 0.6675-70 area

• AUD/USD fails to preserve/capitalize on its intraday uptick amid a modest USD strength.
• Hawkish Fed expectations push the US bond yields higher and underpin the Greenback.
• The RBA’s dovish shift supports prospects for some meaningful downside for the pair.
• Traders now look forward to important US macro releases for short-term opportunities.

The AUD/USD pair continues with its struggle to find acceptance above the 0.6700 round-figure mark and trims a part of its modest intraday gains back closer to the weekly high. The pair retreats to the lower end of its daily trading range during the early European session and is currently placed around the 0.6675-0.6670 region, nearly unchanged for the day.

The US Dollar attracts fresh buying amid reviving bets for a further policy tightening by the Federal Reserve and turns out to be a key factor acting as a headwind for the AUD/USD pair. Despite uncertainties over the US banking system, investors seem convinced that the Fed might still go ahead with a smaller 25 bps rate hike at its March policy meeting. The expectations were reaffirmed by the crucial US CPI report on Tuesday, which showed that inflation isn't coming down quite as fast as hoped.

This, in turn, continues to push the US Treasury bond yields and lend some support to the Greenback. The AUD/USD bulls, meanwhile, seem rather unimpressed by the better-than-expected Chinese Retail Sales and Fixed Asset Investment data, indicating that certain facets of the world's second-largest economy were on a steady path towards recovery. Even a generally positive risk tone, which tends to undermine the safe-haven buck, does little to benefit the risk-sensitive Australian Dollar.

Investors turned optimistic amid easing fears about a broader systemic crisis from the sudden collapse of Silicon Valley Bank (SVB). This led to the overnight relief rally on Wall Street and is evident from a stable performance around the European equity markets. The intraday price action, along with the Reserve Bank of Australia's (RBA) dovish shift, signalling that it might be nearing the end of its rate-hiking cycle, suggests that the path of least resistance for the AUD/USD pair is to the downside.

Traders now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI), monthly Retail Sales figures and the Empire State Manufacturing Index later during the early North American session. Apart from this, the US bond yields and the broader risk sentiment might influence the USD price dynamics, which, in turn, should produce short-term opportunities around the AUD/USD pair. The key focus, however, will remain on the FOMC monetary policy meeting, starting next Tuesday.

Technical levels to watch