AUD / USD rises to 0.7525-30 zone, returns near weekly highs set on Wednesday

• Increased bets on an early RBA rate hike helped AUD / USD attract some buying on Thursday’s dips.
• The recovery in US bond yields acted as a tailwind for the USD and could limit the pair’s gains.

The pair AUD/USD managed to recover more than 40 pips from the daily lows and climbed to new daily highs, around the 0.7525-30 region in the last hour.

The pair drew some falling buying on Thursday and reversed an intraday slide to three-day lows around the 0.7480-75 region amid mounting bets on a rate hike by the Reserve Bank of Australia. (RBA). The speculation was fueled by Wednesday’s release of RBA-cut median inflation for the third quarter, indicating that pressures on consumer costs are taking hold.

This, coupled with a dovish action in the price of the US dollar, helped offset a softer risk tone and acted as a tailwind for the Aussie perceived as riskier. The AUD / USD pair has now approached the weekly highs touched on Wednesday, although any significant positive movement seems elusive. A positive rally in US Treasury yields should help limit USD losses and capitalization gains for the pair.

Investors can also refrain from making aggressive bets, rather than preferring to wait on the sidelines before Thursday’s key events / data risks. The European Central Bank will announce its monetary policy decision during the middle of the European session. Apart from this, the report should instill volatility in the markets and provide a new boost to the AUD / USD pair.

Therefore, any subsequent bullish movement risks fading fairly quickly, warranting some caution before positioning for a new intraday appreciation move. However, the pair, for now, has turned positive for the fourth day in a row and the emergence of new buying at lower levels supports the prospects for a move towards monthly swing highs, around the 0.7545 area.

Technical levels