- AUDUSD regains positive traction on Friday amid widespread USD weakness.
- The risk-positive tone weakens the dollar and benefits the risk-sensitive Aussie.
- The dovish outlook on the Fed should limit dollar losses ahead of the NFP report.
The pair AUDUSD catches some buying on Friday and caps this week’s sharp pullback from around the 0.6500 psychological level. The pair is holding on to its intraday gains during the first half of the European session and is currently sitting near the daily high, just above 0.6350.
US Dollar Halts Post-FOMC Recovery and pulls back from two-week highs hit on Thursday, which in turn offers some support to the AUDUSD pair. A generally positive tone from equity markets weighs on the safe-haven US dollar and benefits the Australian dollar, which is perceived to be riskier. However, the USD’s decline appears limited amid elevated US Treasury yields, bolstered by a more aggressive stance taken by the Federal Reserve.
Fed Chairman Jerome Powell, it should be remembered, played down speculation about a dovish swing, saying on Wednesday that it was premature to speak of a pause in the rate hike cycle. This, in turn, pushed the rate-sensitive 2-year US government bond yield closer to the psychological 5% level, or its 15-year high, on Thursday. Furthermore, the benchmark 10-year US Treasury bond remains above the 4.0% level and favors dollar bulls.
This fundamental background warrants some caution before opening aggressively bullish AUDUSD positions and positioning for further gains ahead of the crucial US NFP. Data is expected to show that the economy added 200,000 new jobs in October and that the unemployment rate rose to 3.6% from the previous 3.5%. The data will weigh on the dollar and produce short-term opportunities on the last day of the week.
AUDUSD technical levels
Source: Fx Street
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