AUDUSD climbs further beyond mid-0.6400s amid weaker USD, lacks follow-through

• AUDUSD reverses an early dip to the 0.6400 mark amid fresh USD selling.
• Friday’s mixed NFP report and the risk-on-impulse weigh on the buck.
• China’s zero-COVID policy, recession fears might cap gains for the pair.

The AUDUSD pair attracts some buying in the vicinity of the 0.6400 mark on Monday and fills the weekly bearish gap opening during the first half of the European session. The pair hits a fresh daily high in the last hour, albeit lacks follow-through and remains below the 0.6500 psychological level.

The US Dollar struggles to preserve its modest intraday gains and turns lower for the second successive day, which, in turn, is seen offering some support to the AUDUSD pair. The mixed results from the US monthly jobs report released on Friday fueled speculations that the Federal Reserve might slow the pace of its policy tightening. This, along with a positive turnaround in the global risk sentiment, weighs on the safe-haven greenback and benefits the risk-sensitive Aussie.

That said, growing market worries about the headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy might keep a lid on the optimistic move. Apart from this, elevated US Treasury bond yields should act as a tailwind for the greenback and contribute to capping the upside for the AUDUSD pair, at least for the time being. Traders might also prefer to wait for a fresh catalyst from the US consumer inflation figures on Thursday.

Even from a technical perspective, spot prices are yet to confirm a convincing breakout through a downward sloping trend-line extending from the August monthly swing high. In the absence of any major market-moving economic releases on Monday, the fundamental backdrop warrants some caution for aggressive bullish traders. Hence, it will be prudent to wait for strong follow-through buying before positioning for any meaningful appreciating move for the AUDUSD pair.

Technical levels to watch