AUD/USD surrenders modest intraday gains, hangs near daily low around mid-0.7100s

• AUD/USD struggled to preserve its modest intraday gains to 0.7175-80 region.
• The Fed’s hawkish outlook acted as a tailwind for the USD and capped the pair.
• The market focus remains glued to Friday’s release of the US jobs report – NFP.

The AUD/USD pair surrendered its modest intraday gains and was last seen hovering near the daily low, around mid-0.7100s during the early European session.

The pair edged higher during the early part of the trading on Friday amid a positive turnaround in the equity markets, which tends to benefit the perceived riskier aussie. On the other hand, retreating US Treasury bond yields kept the US dollar bulls on the defensive and provided a modest lift to the AUD/USD pair.

The uptick, however, lacked follow-through buying and ran out of steam near the 0.7175-80 region. Firming expectations that the Fed will tighten its monetary policy faster than anticipated previously acted as a tailwind for the greenback and kept a lid on any further gains for the AUD/USD pair, at least for now.

It is worth recalling that the December FOMC monetary policy meeting minutes released on Wednesday indicated that the US central bank could hike interest rates soon to combat high inflation. The money market was quick to reaction and is now pricing in a roughly 80% chance for an eventual liftoff in March 2022.

Hence, investors preferred to move on the sidelines and wait to see if the US jobs data due later this Friday would reinforce the need for higher interest rates. This, in turn, warrants some caution for aggressive traders and before positioning for any meaningful intraday movement.

Technical levels to watch