AUD/USD retreats further from multi-month tops, closer to mid-0.7700s

The AUD/USD pair edged lower through the early European session and refreshed daily lows, around the 0.7770-65 region in the last hour.

Having struggled to find acceptance above the 0.7800 mark, the pair witnessed some profit-taking on Thursday and has now eroded a part of the previous day's strong positive move to fresh 34-month tops. The pullback was exclusively sponsored by a modest US dollar uptick, though the prevalent upbeat market mood might help limit the downside for the perceived riskier aussie.

The market has been pricing in the possibility of more US fiscal stimulus measures following the Democratic sweep in the crucial US Senate runoff elections in the state of Georgia. Expectations of larger government borrowing pushed the benchmark 10-year US Treasury yield further beyond 1.0% mark, to the highest level since March 2020, which provided some respite to the greenback.

Apart from the increasing likelihood of additional US financial aid package, hopes for a strong global economic recovery in 2021 continued boosting investors' confidence. This was evident from the ongoing rally in the equity markets, which might hold the USD bulls from placing aggressive bets. This, in turn, should extend some support to the AUD/USD pair and limit any deeper losses.

Market participants now look forward to the US economic docket – highlighting the usual Initial Weekly Jobless Claims and ISM Services PMI – later during the early North American session. The data, along with the broader market risk sentiment and the US bond yields, might influence the USD price dynamics and produce some short-term trading opportunities around the AUD/USD pair.

Technical levels to watch