AUD/USD clings to gains near 0.7200, lacks follow-through amid resurgent USD demand

• AUD/USD gained some follow-through traction for the second successive day on Monday.
• A generally positive tone around the equity markets benefitted the perceived riskier aussie.
• Hawkish Fed expectations, elevated US bond yields underpinned the USD and capped gains.

The AUD/USD pair held on to its intraday gains heading into the European session and was last seen hovering near the daily high, around the 0.7200 mark.

The pair built on Friday's bounce from the 0.7130 area, or over two-week low and gained some follow-through traction on the first day of a new trading week. This marked the second successive day of an uptick and was sponsored by a generally positive tone around the equity markets, which tends to benefit the perceived riskier aussie. That said, resurgent US dollar demand held back bulls from placing aggressive bets and capped the upside for the AUD/USD pair, at least for now.

The greenback made a solid comeback on Monday amid elevated US Treasury bond yields, bolstered by expectations for a faster policy tightening by the Fed. The disappointing headline NFP print was offset by a larger than anticipated fall in the US unemployment rate and strong growth in wages. The data reaffirmed market bets for an eventual Fed lift-off in March 2022, which, in turn, was seen as a key factor that pushed the US bond yields higher and helped revive the USD demand.

The fundamental backdrop favours the USD bulls and warrants some caution before positioning for any further appreciating move for the AUD/USD pair. Investors might also be reluctant to place aggressive bets and prefer to wait for a fresh catalyst from the latest US consumer inflation figures, due for release on Wednesday. Apart from this, traders will further take cues from Fed Chair Jerome Powell's testimony on Tuesday and the US monthly Retail Sales data on Friday.

In the meantime, the US bond yields will continue to play a key role in influencing the USD price dynamics and provide some impetus to the AUD/USD pair. This, along with the broader market risk sentiment, should allow traders to grab some short-term opportunities around the major.

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