• AUD/USD reverses an intraday dip, though lacks follow-through buying beyond the 0.6900 mark.
• Subdued USD price action, a positive risk tone offers some support to the risk-sensitive aussie.
• Hawkish Fed expectations limit the USD downside and cap gains amid growing recession fears.

The AUD/USD pair struggles to capitalize on the previous day's goodish rebound from the 0.6840 region, or a six-week low and attracts fresh selling on Tuesday. The intraday downtick, however, find some support near the 0.6875 area and lifts spot prices to a fresh daily high, around the 0.6915-0.6920 zone during the early European session.

The Australian Bureau of Statistics reported that building approvals plunged 17.2% in July, following a 0.6% decline in June. That data points to the steadily deteriorating conditions in the housing market amid rising interest rates, which, in turn, exert some downward pressure on the Australian dollar. That said, subdued US dollar price action helped limit the downside for the AUD/USD pair.

A further pullback in the US Treasury bond yields, along with a generally positive risk tone, seem to undermine the safe-haven greenback and offer some support to the risk-sensitive. The AUD/USD pair, however, might struggles to capitalize on the intraday bounce amid hawkish Fed expectations, which should continue to act as a tailwind for the greenback in the near term.

In fact, the markets are pricing in a greater chance of a supersized 75 bps Fed rate hike move at the September policy meeting. The bets were reaffirmed by Fed Chair Jerome Powell, signalling that interest rates would be kept higher for longer to bring down inflation. This, in turn, favours the USD bulls and should hold back traders from positioning for any meaningful upside for the AUD/USD pair.

Market participants look forward to the US economic docket - featuring JOLTS Job Openings data and the Conference Board's Consumer Confidence Index later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the AUD/USD pair.

Technical levels to watch