• AUD/USD witnessed some selling on Friday and snapped a two-day winning streak to the weekly high.
• The emergence of fresh USD buying turned out to be a key factor that exerted downward pressure.
• Retreating US bond yields, a positive risk tone might cap gains for the USD and lend support to the pair.

The AUD/USD pair struggled to capitalize on its strong gains recorded over the past two trading sessions and met with a fresh supply on Friday. The pair continued losing ground through the early European session and weakened further below the 0.7000 psychological mark, hitting a fresh daily low in the last hour.

Expectations that the Fed would stick to its policy tightening path to curb soaring inflation revived demand for the US dollar, which, in turn, prompted fresh selling around the AUD/USD pair. It is worth recalling that the so-called dot plot showed that the median projection for the federal funds rate stood at 3.4% for 2022 and 3.8% in 2023.

The greenback, for now, seems to have stalled the post-FOMC retracement slide from a two-decade high and snapped a two-day losing streak to a one-week low touched the previous day. That said, a combination of factors might hold back the USD bulls from placing aggressive bets and offer some support to the AUD/USD pair, at least for the time being.

Investors took comfort from the Fed's view that the rate could decline to 3.4% in 2024 and 2.5% over the long run. This led to a further decline in the US Treasury bond yields. Apart from this, signs of stability in the financial markets could undermine the greenback's safe-haven demand and help limit deeper losses for the risk-sensitive aussie.

Hence, it will be prudent to wait for strong follow-through selling before confirming that the AUD/USD pair's bounce from a monthly low touched earlier this week has run its course. Market participants now look forward to the US economic docket - featuring Industrial Production and Capacity Utilization Rate later during the early North American session.

Apart from this, the US bond yields, might influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities on the last day of the week.

Technical levels to watch