AUD/USD trims a part of its intraday gains, still well bid around 0.7775-80 area

• AUD/USD witnessed a modest intraday pullback from one-month tops amid a modest USD rebound.
• An uptick in the US bond yields, a turnaround in the risk sentiment underpinned the safe-haven USD.
• Reduced Fed rate hike bets might cap gains for the USD and help limit the downside for the major.

The AUD/USD pair retreated around 40 pips from one-month tops and was last seen trading with only modest intraday gains, around the 0.7775 region.

The pair prolonged its recent strong positive momentum from sub-0.7600 levels and gained some follow-through traction through the first half of the trading action on Tuesday. The momentum pushed the AUD/USD pair to the highest level since March 18 and was sponsored by sustained US dollar selling bias. However, a combination of factors kept a lid on any further gains.

A goodish pickup in the US Treasury bond yields helped the USD to stall its recent sharp decline to six-week tops. Apart from this, a turnaround in the US equity futures extended some additional support to the safe-haven greenback. This, in turn, was seen as a key factor that capped gains for the perceived riskier aussie, rather prompted some selling around the AUD/USD pair.

That said, speculations that the Fed will keep interest rates near zero levels for a longer period might hold the USD bulls from placing aggressive bets and limit the downside for the AUD/USD pair. Investors seem convinced with the Fed's view that any spike in inflation is likely to be transitory and have been scaling back expectations for an earlier than anticipated lift-off.

Hence, it will be prudent to wait for some strong follow-through selling below the overnight swing lows, around the 0.7700 mark before confirming that the AUD/USD pair might have topped out in the near term. This will set the stage for the resumption of the prior corrective decline from the key 0.8000 psychological mark, or three-year tops touched on February 25.

There isn't any major market-moving economic data due for release from the US on Tuesday. Hence, the US bond yields will play a key role in influencing the USD price dynamics. Traders might further take cues from the broader market risk sentiment in order to grab some short-term opportunities around the AUD/USD pair.

Technical levels to watch