AUD/USD rallies to nearly two-week high, around 0.6625-30 area ahead of US NFP report

• AUD/USD scales higher for the second straight day and jumps to a nearly two-week high.
• Reduced bets for another 25 bps Fed rate hike in June continue to weigh on the Greenback.
• A positive risk tone further benefits the risk-sensitive Aussie ahead of the key US NFP report.

The AUD/USD pair builds on this week's recovery from its lowest level since November 2022 and gains strong follow-through traction for the second successive day on Friday. The momentum remains uninterrupted through the first half of the European session and lifts spot prices to a nearly two-week high, around the 0.6625-0.6630 region in the last hour.

The US Dollar (USD) adds to the overnight heavy losses and remains depressed on the last day of the week, which, in turn, is seen as a key factor pushing the AUD/USD pair higher. The recent comments by a slew of influential Federal Reserve (Fed) officials forced investors to scale back their expectations for another 25 bps lift-off in June. This, along with a generally positive risk tone, drags the safe-haven buck to over a one-week low and benefits the risk-sensitive Aussie.

A private survey showed on Thursday that China’s manufacturing sector unexpectedly registered modest growth in May. Furthermore, the passage of bipartisan legislation to lift the government's $31.4 trillion debt ceiling and avert an unprecedented American default boosts investors' confidence. Apart from this, speculations that the Reserve Bank of Australia (RBA) could tighten its monetary policy support prospects for a further appreciating move for the AUD/USD pair.

That said, the Relative Strength Index (RSI) on the 1-hour chart is already flashing overbought conditions and acting as a headwind for spot prices. Traders might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of the release of the US monthly employment details, due later during the early North American session. The popularly known NFP report will play a key role in driving the USD demand and provide some meaningful impetus to the AUD/USD pair.

Technical levels to watch