AUD / USD cuts initial recovery gains, trading around 0.7420

• AUD / USD struggles to preserve its recovery momentum on Friday.
• The US dollar index rises towards 92.70.
• The major Wall Street indices appear to be opening modestly higher.

The pair AUD/USD it lost more than 30 pips on Thursday and posted a modest bounce during Asian business hours on Friday. However, the pair appears to be struggling to preserve its bullish momentum and was last seen posting small daily losses at 0.7423.

In the absence of high-level macro data releases, the USD market valuation continues to impact AUD / USD moves ahead of the weekend. Following Wednesday’s sharp decline, the US Dollar Index (DXY) gained 0.2% on Thursday and continues to rise on Friday, limiting the AUD / USD rise. At the moment, the DXY is rising 0.12% to 92.66.

Meanwhile, US stock index futures are trading modestly higher on Friday, suggesting that major Wall Street indices could open into positive territory and support AUD / USD.

AUD / USD short-term outlook

The UOB Group currency strategists believe there is scope for the AUD to fall below 0.7400 in the near term.

“The bias still appears to be sloping to the downside, but the AUD has to close below 0.7400 before a sustained decline can be expected,” analysts said. “There is no change in our opinion for now even though the outlook for the AUD to move clearly below 0.7400 has increased. Looking ahead, the next major support below 0.7400 is at 0.7350.”

Additional levels