AUD/USD recovers modest intraday losses, sits near multi-week high ahead of US PMIs

• AUD/USD attracted some dip-buying on Friday, though the uptick lacked any follow-through.
• Recession fears revived demand for the safe-haven USD and capped the risk-sensitive aussie.
• The mixed fundamental backdrop warrants some caution before placing fresh directional bets.

The AUD/USD pair reversed an intraday dip to sub-0.6900 levels and inched back closer to a nearly four-week high touched earlier this Friday. The pair was last seen trading around the 0.6920 region during the first half of the European session.

The minutes from the Reserve Bank of Australia policy meeting released on Tuesday indicated that further increases in interest rates will be needed to return inflation to the target over time. This, to a larger extent, helped offset the downbeat Australian PMI prints and assisted the AUD/USD pair to attract some dip-buying on the last day of the week.

That said, growing fears about a possible recession acted as a headwind for the risk-sensitive aussie. The markets worries were reaffirmed by the prevalent cautious mood around the equity markets, which revived demand for the safe-haven US dollar. This was seen as another factor that contributed to keeping a lid on any meaningful gains for the AUD/USD pair.

The global flight to safety, meanwhile, led to a further decline in the US Treasury bond yields. This, along with receding bets for a 100 bps rate hike by the Federal Reserve in July, could cap the USD and offer some support to the AUD/USD pair. The mixed fundamental backdrop, however, warrants some caution before placing aggressive directional bets.

Market participants now look forward to the US economic docket, featuring the release of the flash US PMI prints for July. Apart from this, the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from broader market risk sentiment to grab short-term opportunities.

Technical levels to watch