AUD/USD stands near its daily high around 0.6535

• AUD/USD attracts some buyers on Thursday and recovers further from year lows.
• Upbeat data from China and hawkish RBA expectations support Australian dollar.
• The reduction in bets on a new Fed rate hike in June weighs on the dollar and gives it more support.
• The risk aversion momentum could limit the appreciation of the risk sensitive Australian dollar.

The AUD/USD pair gains positive traction on Thursday and builds on the previous day’s late recovery from the 0.6460-0.6455 region, or its lowest level since November 2022. The pair is holding on to its intraday gains at the start of the American session and is currently positioned near the upper end of its daily trading range, around the 0.6530-0.6535 zone.

A private survey showed that China’s manufacturing sector unexpectedly posted modest growth in May. Apart from this, expectations that the Reserve Bank of Australia (RBA) could tighten its monetary policy further act as a tailwind for the Aussie. Indeed, RBA Governor Philip Lowe had warned on Wednesday that price stickiness could invite the central bank to hike rates further, followed by the release of stronger domestic consumer inflation figures. . This, coupled with modest US dollar (USD) weakness, provides a nice boost to the AUD/USD pair.

The dollar draws fresh encouragement after an early rally and retreats further from its highest level since mid-March reached on Wednesday amid diminishing odds of another 25 basis point rate hike by the Federal Reserve (Fed). It should be remembered that on Wednesday a duo of FOMC members expressed their willingness to pause interest rate hikes this month. This, in turn, triggers a sharp intraday drop in US Treasury yields, which puts some downward pressure on the Dollar and continues to support the supply tone surrounding the AUD/USD pair.

USD bulls, for their part, appear unimpressed by the better-than-expected release of the US ADP report, which shows private-sector employers added 278,000 jobs in May, versus 170,000 expected. and the 296 of the previous month. That said, the risk aversion momentum – amid concerns about a global economic slowdown, especially in China – could benefit the safe-haven dollar and act as a headwind for the risk-sensitive Australian dollar (AUD). This, in turn, warrants some caution on the part of bullish traders and positioning for any further appreciation.

technical levels