AUD/USD retreats from multi-month tops, still well bid near 0.6930-35 region

The AUD/USD pair retreated over 50 pips from five-month tops, albeit has still managed to trade modest daily gains around the 0.6930-40 region.

The US dollar selling bias remained unabated through the early part of Wednesday's trading action and assisted the AUD/USD pair to prolong its recent bullish trajectory. Growing optimism about a global economic recovery helped offset concerns over US-China tensions and rising social unrest in the United States, which, in turn, kept the safe-haven greenback under pressure.

Apart from the prevalent risk-on mood, the perceived riskier aussie was further supported by mostly in line Australian GDP figures. In fact, Australia’s first-quarter GDP came in to show a contraction of 0.3% and the yearly rate stood at 1.4%. The AUD/USD pair climbed to the highest level since early March, albeit stalled the momentum ahead of the key 0.7000 psychological mark.

The pullback lacked any obvious catalyst and could be solely attributed to some profit-taking amid extremely overbought conditions on short-term charts. Given the AUD/USD pair's rally over around 500 pips since last Thursday, traders seemed inclined to take some profits off the table. This makes it prudent to wait for some follow-through selling before confirming that the pair might have topped out in the near-term.

Moving ahead, market participants now look forward to the US macro data for a fresh impetus later during the early North American session. Wednesday's US economic docket highlights the release of the ADP report on private-sector employment, which will be followed by the ISM Non-Manufacturing PMI for May.

The data might influence the USD price dynamics, which along with the broader market risk sentiment will play a key role in producing some meaningful trading opportunities. The market focus will then shifts to Friday's release of the closely watched US monthly jobs report, popularly known as NFP.

Technical levels to watch