AUD/USD sits near 1-week tops, around mid-0.7200s ahead of Powell’s speech

The AUD/USD pair shot to over one-week tops, around the 0.7260-65 region during the early European session, albeit quickly retreated few pips thereafter.

The pair built on this week's goodish bounce from mid-0.7100s – a support marked by the lower boundary of a one-month-old ascending trend-channel – and gained traction for the third consecutive session on Thursday. The momentum was exclusively sponsored by the prevalent selling bias surrounding the US dollar.

The greenback remained depressed amid expectations for dovish Fed signals. Hence, the key focus will remain on the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium later this Thursday. Powell's remarks will be closely scrutinized for clues about the central bank's policy framework to push up inflation.

The Australian dollar was further supported by domestic data, which showed that business spending fell less-than-expected. In fact, private capital expenditure (CAPEX) contracted 5.9% during the second quarter as against the forecasted drop of 8.4%. However, a softer risk tone capped any further gains for the AUD/USD pair.

The latest escalation between the world's two largest economies, over actions in the disputed South China Sea, took its toll on the global risk sentiment. It is worth recalling that the US imposed visa restrictions on certain Chinese individuals. 24 companies were also added to the entity list for helping to build military islands in the area.

It will now be interesting to see if bulls are able to capitalize on the move or opt to lighten their positions ahead of Thursday's key event risk. In the meantime, the release of the prelim US Q2 GDP report might influence the USD price dynamics and provide some trading impetus during the early North American session.

Technical levels to watch