AUD/USD’s recovery from 0.7170 stalls at 0.7270 area

The Australian dollar has appreciated against the USD for the second day in a row on Friday, to consolidate at 0.7270 after bouncing up from 0.7170 lows earlier this week. The pair has erased previous losses and is set to close the week practically unchanged.

The US dollar loses ground despite bright US data

The Aussie has taken advantage of a softer US dollar on Friday. The decline in US T-Bond yields, with the 10-year Treasury note dropping below the 1.5% mark, has taken a toll on demand for the greenback. Beyond that, the impasse on the US debt limit is raising concerns about the potential consequences of a credit default, adding negative pressure to the USD.

US macroeconomic figures have been brighter than expected, although the impact on the USD has been muted. The ISM Manufacturing PMI increased to 61.1 in September from 59.9 in August above market expectations of a slight decline to 59.6. Beyond that, US consumer spending, a highly relevant contributor to US economic activity has posted a 0.8% increase in August, beating a 0.6% market consensus.

The US Dollar Index, which measures the value of the USD against a basket of the most traded currencies has extended its pullback from one-year highs at 94.50 reached earlier this week although it remains at 94.00, well above previous highs. The dollar has been rallying steadily in September, buoyed by higher US bond yields amid market expectations that the Federal Reserve will be the first major central bank to start rolling back its QE program.

AUD/USD remains offered below the four-month downtrend at 0.7390 – Commerzbank

From a Technical perspective, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, sees the Aussie biased lower while below 0.7390: “AUD/USD’s outlook stays negative. The pair recently failed at the four-month downtrend at 0.7390 and we will retain a negative bias while capped here (…) We look for losses to 0.7106, the August low. Key support remains at 0.7062/0.6991. This represents the September and November 2020 lows.”

Technical levels to watch