AUD/USD clings to gains above mid-0.6600s as traders keenly await Powell’s speech

• AUD/USD catches aggressive bids on Friday and draws support from a modest USD weakness.
• The risk-on impulse undermines the safe-haven buck and benefits the risk-sensitive Aussie.
• A further rise in the US bond yields limits the USD losses ahead of Fed Chair Powell’s speech.

The AUD/USD pair gains strong positive traction on the last day of the week and moves away from a nearly three-week low, around the 0.6600 round-figure mark touched on Thursday. The pair stick to its intraday gains through the early North American session and is currently placed around the 0.6655-0.6660 region, just a few pips below the daily high.

A positive risk tone prompts some profit-taking around the safe-haven US Dollar (USD), especially after the recent bullish run to a nearly two-month high, and turns out to be a key factor benefitting the risk-sensitive Aussie. The latest optimism over the potential of lifting the US debt ceiling boosts investors' confidence and remains supportive of a further rise in the equity markets. The USD downtick could further be attributed to some repositioning trade ahead of Federal Reserve (Fed) Chair Jerome Powell's speech, due later during the US session.

The recent hawkish remarks by several Fed officials fueled speculations that the US central bank will keep interest rates higher for longer. Moreover, the current market pricing indicates a smaller chance of another 25 bps lift-off at the next FOMC policy meeting in June. Hence, Powell's comments will be closely scrutinized for clues about the future rate-hike path, which will play a key role in influencing the near-term USD price dynamics and help traders to determine the next leg of a directional move for the AUD/USD pair.

In the meantime, worrying signs about global economic growth, particularly in China, could act as a headwind for the Australian Dollar. In fact, data released from China this week showed that the world's second-largest economy underperformed in April. Apart from this, bets that the Reserve Bank of Australia (RBA) will refrain from hiking in June, bolstered by Thursday's dismal domestic employment details, could further contribute to capping the upside for the AUD/USD pair and warrants some caution for aggressive bullish traders.

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