- AUD/USD sees a modest pullback from near two-month highs set on Thursday.
- The USD short-covering move is seen as a key factor putting downward pressure on the pair.
- The risk push offers some support to the risk sensitive Aussie and caps the downside.
The pair AUD/USD faces a rejection near the technically significant 200-day SMA on Friday and witnessed a modest pullback from close to a two-month high hit the previous day. However, the pair manages to bounce a few pips off the daily low and now appears to have stabilized around 0.7100.
The US dollar gains some positive traction and halts its recent slide to the lowest level since late June, which in turn puts some downward pressure on the AUD/USD pair. Despite signs of easing of inflationary pressures in the US, recent comments from several Federal Reserve officials indicate that the US central bank will maintain its tightening policy. This is seen as a key factor that prompted traders to lighten their bearish bets on the dollar on the last day of the week.
However, a combination of factors could curb dollar bulls in their aggressive bets and help limit AUD/USD losses, at least for now. A modest pullback in US Treasury yields could act as a dollar headwind. Aside from this, the generally positive tone in equity markets could help limit gains for the safe-haven dollar and give some support to the risk-sensitive Aussie. This, in turn, warrants some caution on the part of bearish traders.
However, the AUD/USD pair remains on track to post strong weekly gains, the third of the previous four, and post its biggest weekly close since May. Traders now await the US economic docket, in which the Preliminary US Consumer Sentiment Index for Michigan will be released. This, coupled with US bond yields and broader risk sentiment, could influence dollar price action during the early North American session and provide some momentum to the AUD/USD pair.
Technical levels
Source: Fx Street
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