AUD/USD remains depressed near 0.6700

• The AUD/USD pair has pulled back from the two-week high reached this Monday.
• The intraday recovery in global risk sentiment provides some support for the pair.
• Bets on a less aggressive Fed cause new sales of dollars and help limit the fall.
• The RBA Minutes will be published on Tuesday, which will serve as a short-term stimulus.

The pair AUD/USD it fails to capitalize on its modest intraday gains and falls back from a nearly two-week high around the 0.6730 area touched earlier this Monday. However, the pair manages to bounce a few points from the daily low and is trading just below 0.6700 at the start of the American session.

The strong rebound in US Equity Futures turns out to be a key factor providing some support for the risk-sensitive Aussie amid fresh selling around the US dollar. Against the backdrop of a modest recovery in global risk sentiment, a further drop in US Treasury yields is putting some downward pressure on the safe-haven dollar and acting as a tailwind for the US dollar. AUD/USD pair.

The recent failure of two mid-sized US banks – Silicon Valley Bank and Signature Bank – forced investors to reduce their bets in favor of more aggressive US central bank policy tightening. In fact, markets are now pricing in a higher probability of a minor 25 basis point hike at the highly anticipated FOMC policy meeting, which begins this Tuesday, continuing to drag US bond yields lower.

It is worth mentioning that the rate-sensitive 2-year US bond posted its biggest drop in three days since Black Monday in October 1987 last week. This keeps USD bulls defensive and helps limit the fall of the AUD/USD pair. That said, concerns about the risk of contagion and the possibility of a full-blown global banking crisis could limit any optimism in the markets.

Traders may also refrain from making aggressive directional bets, preferring to stay out ahead of the release of the Reserve Bank of Australia (RBA) policy meeting minutes, scheduled for Tuesday’s Asian session. The FOMC decision will then be announced on Wednesday, which will weigh on the dollar and give AUD/USD a further directional boost.

Technical levels to watch