- AUD/USD recovers from an initial drop towards 0.7000 and rises to fresh daily highs.
- A good recovery in the stock markets weighs on the safe haven USD and offers support to the pair.
- Recession fears should curb any bullish moves in the markets and limit the pair’s gains.
The pair AUD/USD has regained ground lost initially and has risen to a new daily high above the level of 0.7050 at the start of the European session on Friday.
The pair attracted some buying near the psychological level of 0.7000 and has now approached the two-week highs reached the previous day. Global risk sentiment recovered somewhat after the People’s Bank of China (PBOC) will cut its five-year prime rate by 15 basis points to offset the economic slowdown. This, in turn, did not help the safe-haven US dollar to capitalize on its modest intraday gains and offered some support to the AUD.
The Australian dollar was strengthened by the signal from the Reserve Bank of Australia that a further hike in interest rates in June is still possible, amid upside risks to inflation. Market expectations were bolstered by national jobs data released on Thursday, which showed the jobless rate fell to the lowest level in nearly 50 years. That said, the gloomy global economic outlook should dampen any bullish moves in the markets and the AUD/USD pair.
The markets continue concerned that a more aggressive move by major central banks to curb inflation could challenge global economic growth. Additionally, the war between Russia and Ukraine and prolonged COVID-19 lockdowns in China have fueled recession fears. This makes it prudent to wait for strong follow-on buying before investors start to position themselves for an extension of the recent AUD/USD rebound from the yearly low around the 0.6830-0.6825 region touched last week. .
In the absence of any major economic releases from the US, broader market risk sentiment will continue to influence dollar price dynamics. This, in turn, should give the AUD/USD pair some momentum and allow investors to take advantage of short-term opportunities on the last day of the week.
AUD/USD technical levels
Source: Fx Street
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