AUD/USD near multi-month highs just above 0.6800 ahead of US NFP.

• AUD/USD gains some positive traction for the fourth day in a row amid sustained USD selling.
• The Fed’s dovish turn continues to drag US bond yields lower and weigh on the dollar.
• A softer risk tone appears to weigh on the risk-sensitive AUD ahead of the US NFP.

The pair AUD/USD reverses an intraday decline to levels below 0.6800 and turns positive for the fourth day in a row on Friday. The constant intraday rise extends throughout the first half of the European session and lifts the pair up to the zone of 0.6835again approaching the highest level since September 13 touched on Thursday.

The sale of the US dollar remains in the midst of the rising expectations for a less aggressive tightening of monetary policy by the Fed, which in turn acts as a tailwind for the AUD/USD pair. Dovish comments from Fed Chairman Jerome Powell, along with signs of easing inflationary pressures, reaffirmed expectations that the US central bank will slow down the rate hike cycle. This follows from the decline in US Treasury yields and continues to weigh on the dollar.

Also, hopes for more stimulus from China and the relaxation of strict COVID-19 restrictions in the world’s second largest economy offer additional support to the Australian dollar. That being said, cautious market sentiment could act as a headwind for currencies perceived to be riskier and cap any further gains for AUD/USD. Investors also seem reluctant to take aggressive positions ahead of the release of the monthly US employment data.

The popularly known NFP report will be released later in the American session and will provide new data on the US labor market. This could influence the Fed’s policy outlook and boost demand for the dollar ahead of the next FOMC meeting on December 13-14. Other than this, the broader market risk sentiment should give the AUD/USD pair some momentum. However, the pair looks set to post gains for the second week in a row.

AUD/USD technical levels