• AUDUSD regains positive traction on Friday amid broad-based USD weakness.
• A positive risk tone undermines the buck and benefits the risk-sensitive Aussie.
• The Fed’s hawkish outlook should limit the USD losses ahead of the NFP report.

The AUDUSD pair catches some bids on Friday and stalls this week’s sharp retracement slide from the vicinity of the 0.6500 psychological mark. The pair sticks to its intraday gains through the first half of the European session and is currently placed near the daily peak, just above mid-0.6300s.

The US Dollar stalls the post-FOMC rally and retreats from a two-week high touched on Thursday, which, in turn, offers some support to the AUDUSD pair. A generally positive tone around the equity markets is seen weighing on the safe-haven buck and benefitting the perceived riskier Aussie. The downside for the USD, however, seems limited amid elevated US Treasury bond yields, bolstered by a more hawkish stance adopted by the Federal Reserve.

It is worth recalling that Fed Chair Jerome Powell downplayed speculations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle. This, in turn, pushed the yield on the rate-sensitive 2-year US government bond closer to the 5% psychological mark, or a 15-year high on Thursday. Furthermore, the benchmark 10-year US Treasury note holds steady above the 4.0% threshold and favours the USD bulls.

The aforementioned fundamental backdrop warrants some caution before placing aggressive bullish bets around the AUDUSD pair and positioning for any further gains ahead of the crucial US NFP report. The data is expected to show that the economy added 200K positions in October and the jobless rate edged higher to 3.6% from the 3.5% previous. The data will influence the USD and produce short-term trading opportunities on the last day of the week.

Technical levels to watch