AUD/USD flirts with daily low amid stronger dollar, looks vulnerable near 0.6250

• AUD/USD finds itself in fresh supply on Friday amid a nice uptick in dollar demand.
• The Fed’s aggressive rate hike bets and the continued rise in US bond yields boost the dollar.
• Recession fears and a softer risk tone are driving flows away from the risk-sensitive Aussie.

The AUD/USD pair is under some selling pressure on Friday and pulls back further from an almost two-week high around the 0.6355 area hit the previous day. The pair maintains its bid tone during the first half of the European session and is currently flirting with the daily low just below 0.6200.

The US dollar regains positive traction and rises to more than a one-week high, which in turn is seen as a key factor putting pressure on the AUD/USD pair. Dovish-tongued Philadelphia Fed President Patrick Harker’s late-night remarks reinforced expectations of a further rate hike in November. Harker warned that the US central bank is actively trying to rein in the economy to combat inflation.

His comments added fuel to the recent rally in US Treasury yields. Indeed, the benchmark 10-year US government bond rate jumps to its highest level since the 2008 financial crisis, continuing to act as a tailwind for the dollar. Aside from this, a softer risk tone benefits the dollar as a safe haven and helps draw flows away from the risk-sensitive Aussie.

Aside from this, the RBA’s decision to slow the pace of monetary policy tightening earlier this month suggests that the path of least resistance for AUD/USD is to the downside. Therefore, a further pullback towards the 0.6200 signal, en route to the season low around the 0.6170 area, remains a distinct possibility amid the lack of market-affecting US macro releases.

Technical levels to watch