On Friday, the Australian dollar nudged higher, recouping some of its overnight losses.
COVID-19 fears continued to be a headwind for the Australian dollar, limiting advances.
The dollar may be supported by rising US bond yields, which favors negative traders.
The AUD/USD pair started the European session with a slight upward bias, but there was no follow-through purchasing. The currency pair was last seen trading around 0.7435-40, up almost 0.15 percent on the day.
The pair found support near 0.7420, just ahead of the YTD lows, and moved higher on the final trading day of the week, recouping some of the overnight losses. However, a number of variables prevented bulls from making aggressive wagers and kept the AUD/USD pair under control.
Investors are nonetheless concerned about the spread of the coronavirus’s highly contagious Delta version. In reality, the Australian state of Victoria was placed on lockdown for five days on Thursday due to an outbreak of COVID-19, which worked as a headwind for the AUD/USD pair.
Meanwhile, investor fears over COVID-19 weighed on sentiment and bolstered the safe-haven US dollar, which was bolstered further by a small increase in US Treasury bond yields. Another aspect contributing to cap gains for the deemed riskier aussie was this.
Aside from that, the greenback was bolstered by aggressive Fed predictions. Despite Fed Chair Jerome Powell’s dovish speech, investors appear to believe that the US central bank would tighten its monetary policy sooner than expected in response to rising inflationary pressures.
The fundamental backdrop appears to be skewed in favor of bearish traders, implying that the AUD/USD pair will continue to depreciate in the near term. As a result, any future move up could be viewed as a selling opportunity, with the risk of fizzling out rapidly.
Even from a technical standpoint, the price movement has been range-bound for the previous two weeks or so, forming a rectangle on the daily chart. Given the recent drop from monthly swing highs in June, this might still be considered a bearish continuation pattern.
A solid breach below 0.7400 will underline the bearish view for the AUD/USD pair and lay the way for further losses. Market players are now anticipating the publication of US Retail Sales data later in the early North American session for a new burst of energy./n
