AUD/USD clings to gains near weekly top, just below mid-0.7300s

The AUD/USD pair maintained its strong bid tone through the early North American session and was last seen trading near the weekly high, just below mid-0.7300s.

The pair gained traction for the third successive day on Thursday and has now rallied nearly 200 pips from the monthly low, around the 0.7165 region touched earlier this week. The Australian dollar drew support from the upbeat domestic jobs report, which showed that the unemployment rate dropped to its lowest level since August 2008. The data lifted bets for an early interest rate hike by the Reserve Bank of Australia and acted as a tailwind for the Australian dollar.

On the other hand, signs of progress in the Russia-Ukraine ceasefire talks and hopes for a diplomatic solution to end the war continued undermining demand for the safe-haven US dollar. Apart from this, retreating US Treasury bond yields further weighed on the greenback, which, in turn, provided an additional boost to the AUD/USD pair. That said, the Fed's hawkish outlook, along with mostly better-than-expected US macro releases helped limit losses for the buck.

The Fed on Wednesday announced the start of the policy tightening cycle and hiked its target fund rate for the first time since 2018. The Fed also hinted that it would adopt a more aggressive policy stance to combat high inflation. The so-called dot plot indicated that the Fed could raise interest rates at all the six remaining meetings in 2022. Fed Chair Jerome Powell added that the US central bank could start shrinking its balance sheet as soon as the next meeting in May.

On the economic data front, the US Weekly Initial Jobless Claims fell more than expected to 214K from the previous upwardly revised reading of 229K and pointed to strong demand for workers. Adding to this, the Philly Fed Manufacturing Index jumped to 27.4 for March as against expectations for a dip to 15 from 16 in the previous month. Apart from this, an intraday pullback in the equity markets extended some support to the greenback and might cap gains for the AUD/USD pair.

The mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for any further appreciating move for the AUD/USD pair. Hence, bulls are likely to wait for some follow-through buying beyond the 0.7360-0.7365 region before placing fresh bets. This should pave the way for a move back towards reclaiming the 0.7400 mark en-route the YTD peak, around the 0.7440 region touched earlier this month.

Technical levels to watch