AUD/USD climbs to three-day tops near 0.7370 area, lacks follow-through

  • AUD/USD attracted buying for the second consecutive day and recovered further from YTD lows.
  • The risk-on impulse undermined the safe-haven USD and benefitted the perceived riskier aussie.
  • COVID-19 jitters might hold bullish traders from placing aggressive bets and cap gains for the pair.

The AUD/USD pair edged higher during the early European session and climbed to three-day tops, around the 0.7365-70 region in the last hour.

The pair gained some positive traction for the second straight session on Thursday and is now looking to build on the previous day’s solid rebound from sub-0.7300 levels – the lowest since November 2020. A further improvement in the global risk sentiment – as depicted by a generally positive tone around the equity markets – acted as a headwind for the safe-haven US dollar. This, in turn, was seen as the only factor lending some support to the perceived riskier aussie.

That said, a combination of factors might hold traders from placing any aggressive bullish bets around the AUD/USD pair and keep a lid on any further gains. Investors remain concerned about the potential economic fallout from the extended lockdowns in Australia’s two most populous states of Sydney and Victoria. The worries were further fueled by Wednesday’s disappointing aussie Retail Sales figures, which recorded the biggest drop since 2021 and fell 1.8% in June.

Meanwhile, the risk-on impulse in the markets might continue to push the US Treasury bond yields higher. This should lend some support to the greenback and further collaborate towards capping the upside for the AUD/USD pair. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the pair has bottomed out in the near term and positioning for any meaningful appreciating move.

Market participants now look forward to the US economic docket, featuring the second-tier releases of the usual Initial Weekly Jobless Claims and Existing Home Sales data. This, along with the US bond yields, might influence the USD price dynamics and provide a fresh impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the major.

Technical levels to watch

FX

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