AUD/USD holds steady above 0.6700, upside remains capped amid weaker risk tone

• AUD/USD attracts some dip-buying on Thursday, though the uptick lacks bullish conviction.
• Retreating US bond yields keeps the USD bulls on the defensive and offers some support.
• Bets for more Fed rate hikes limit the USD losses and caps gains amid the risk-off mood.

The AUD/USD pair reverses an intraday dip to sub-0.6700 levels and climbs to a fresh daily high heading into the North American session on Thursday. Spot prices, however, remain below a technically significant 200-day Simple Moving Average (SMA) and currently trade with only modest intraday gains, around the 0.6720 region.

A sharp intraday slide in the US Treasury bond yields exerts some downward pressure on the US Dollar (USD). The Australian Dollar (AUD), on the other hand, draws support from a hawkish tone from the Reserve Bank of Australia's (RBA) April meeting minutes released earlier this week. This, in turn, acts as a tailwind for the AUD/USD pair, though a combination of factors holds back bulls from placing aggressive bets and keeps a lid on any meaningful upside, at least for the time being.

The markets seem convinced that the Federal Reserve (Fed) will continue raising interest rates and have now fully priced in a 25 bps lift-off in May. Moreover, the Fed funds futures indicate a small chance of another rate hike at the June FOMC meeting and the bets were lifted by the recent hawkish comments by Fed officials. Furthermore, the incoming US macro data pointed to a resilient economy and fueled concerns that the Fed may have more work to do amid easing fears about a banking crisis.

Apart from this, the risk-off impulse - as depicted by a generally weaker tone around the equity markets - benefits the safe-haven Greenback and contributes to capping the risk-sensitive Aussie. This makes it prudent to wait for strong follow-through buying before positioning for any further near-term appreciating move. Market participants now look to the US economic docket, featuring the Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index, for some trading impetus.

Technical levels to watch