- AUD/USD is witnessing a modest intraday retracement from fresh yearly highs hit early this Friday.
- The Fed’s dovish outlook and high US bond yields benefit the USD and limit the pair’s advance.
- Rising commodity prices continue to support the AUD and helped limit any further losses.
The pair AUD/USD has retraced early gains to a new yearly high at 0.7536 and has fallen back to the 0.7500 region during the European session on Friday. At time of writing, the pair is largely unchanged on the day around 0.7515.
The pair struggled to capitalize on its early gains and has seen a modest intraday pullback from the highest level since November 2021 around 0.7535 hit earlier this Friday. The decline could be attributed to the appearance of some buying around the US dollar, which continued to receive support from the Fed’s dovish outlook.
In fact, influential members of the FOMC, including Fed Chairman Jerome Powell, left the door open for a further increase in borrowing costs to reduce unacceptably high inflation. Investors rushed to price in a 50 basis point rate hike at the May meeting and pushed the benchmark 10-year US government bond yield near a 22-month high.
What’s more, concerns that rising crude oil prices would continue to put upward pressure on consumer prices continued to support high US Treasury yields. This, in turn, acted as a tailwind for the US dollar and caused some profit taking around the AUD/USD pair, especially after the recent 350+ pip move higher from the monthly low.
however, decline remains supported amid rising commodity prices, which continued to provide some support to the Australian dollar, a currency linked to commodity prices. Therefore, it will be prudent to wait for a strong continuation sell-off before confirming that the AUD/USD has set a near-term top and positioning for any significant corrective declines.
However, the AUD/USD pair remains on track to post gains for the second week in a row. Market participants now await the US economic calendar, which includes the release of the revised Michigan Consumer Sentiment Index and pending home sales data. This coupled with US bond yields will influence the price dynamics around the USD and provide some momentum to the pair.
AUD/USD technical levels
Source: Fx Street
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