• AUD/USD struggled to capitalize on its modest intraday gains amid an extension of the USD rally.
• Aggressive Fed rate hike bets, mostly upbeat US macro data lifted the USD to over a two-year high.
• The risk-off mood, weaker iron ore prices further collaborated to cap the resources-linked aussie.

The AUD/USD pair surrendered a major part of its intraday gains and retreated below the 0.7200 mark, closer to the daily low during the early North American session.

The pair attracted some buying on Tuesday, though the intraday positive move ran out of steam near the 0.7230 region amid the uninterrupted US dollar rally to the highest level since March 2020. Expectations that the Fed would hike interest rates by 50 bps at each of its next four meetings in May, June, July and September continued underpinning the buck.

Adding to this, the risk-off mood further benefitted the greenback's relative safe-haven status and acted as a headwind for the perceived riskier aussie. The prospects for a more aggressive policy tightening by the Fed, along with prolonged COVID-19 lockdowns in China, fueled concerns about slowing global economic growth and weighed on investors' sentiment.

On the economic data front, the headline US Durable Goods Orders fell short of market expectations and increased by 0.8% MoM in March. This, however, marked a solid rebound from the previous month's upwardly revised reading of -1.7%. Adding to this, orders excluding transportation items climbed 1.1% against 0.6% expected and continued lending support to the USD.

Apart from this, an extended slump in iron ore prices further collaborate to cap any meaningful upside for the resources-linked Australian dollar. The fundamental backdrop seems tilted firmly in favour of bearish traders and supports prospects for an extension of the AUD/USD pair's recent sharp pullback from the 0.7660 region, or the YTD peak touched earlier this month.

Technical levels to watch