AUD/USD bounces off lows, lacks follow-through

The AUD/USD pair bounced around 20 pips from daily lows and was last seen trading in the neutral territory, around the 0.7360-65 region heading into the European session.

The pair managed to find some support and attract some buying near the 0.7345 region for the second consecutive session on Thursday, though any meaningful recovery still seems elusive. Worries about slowing global growth – amid the fast-spreading Delta variant – continued weighing on investors' sentiment. This was evident from the risk-off impulse in the markets, which could act as a headwind for the perceived riskier aussie.

Apart from this, a modest US dollar strength might further collaborate towards capping any meaningful upside for the AUD/USD pair, at least for now. The US data released on Wednesday showed that the number of job openings raced to a new record higher in July while layoffs rose moderately. This suggested that a sharp slowdown in hiring during August was due to employers being unable to find workers rather than weak demand for labour.

This, along with hawkish comments by various Fed officials, reinforced market expectations about an imminent Fed taper announcement. In fact, St. Louis Fed Bank President James Bullard and New York Fed President John Williams backed tapering in 2021. Moreover, Dallas Fed President Robert Kaplan supports a taper-plan announcement later this month.

The fundamental backdrop remains tilted in favour of bearish traders amid the second day of increase in COVID-19 cases in Australia. Hence, any positive move might still be seen as a selling opportunity and runs the risk-off fizzling out rather quickly. That said, traders seemed to have turned cautious ahead of the highly-anticipated ECB policy decision.

Apart from this, the release of US Initial Weekly Jobless Claims will be looked upon for some impetus later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the AUD/USD pair.

Technical levels to watch