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  • A softer tone surrounding the USD assisted AUD/USD to regain traction on Thursday.
  • A modest uptick in the US bond yields limited the USD downside and capped gains.
  • Wednesday’s key focus will remain on Fed Chair Jerome Powell’s scheduled speech.

The AUD/USD pair retreated around 20-25 pips from daily tops and was last seen trading with modest gains near the 0.7625-30 region.

The pair once again showed some resilience near the 0.7600 mark and managed to regain some positive traction on Thursday amid a softer tone surrounding the US dollar. However, a combination of factors kept a lid on any further gains for the AUD/USD pair, rather prompted some selling at higher levels.

As investors looked past Wednesday’s FOMC meeting minutes, a modest uptick in the US Treasury bond yields extended some support to the USD. Apart from this, a cautious mood around the equity markets further collaborated towards capping the upside for the perceived riskier aussie, at least for now.

The Fed reiterated its commitment to keep interest rates low until the US economy makes a more secure recovery. Investors, however, seem convinced that a stronger US economic recovery and a possible uptick in US inflation will force the Fed to start tightening the policy earlier than anticipated.

The upbeat outlook for the US economic recovery remained well supported by the impressive pace of coronavirus vaccinations and US President Joe Biden’s infrastructure spending plan. This, in turn, raised doubts that the Fed will retain ultra-low interest rates for a longer period.

Hence, the focus now shifts to Fed Chair Jerome Powell’s scheduled speech later during the US session. His comments will be closely scrutinized for clues about the central bank’s policy outlook, which will influence the USD and provide a fresh directional impetus to the major.

In the meantime, traders will confront the release of the US Initial Weekly Jobless Claims. This, along with the US bond yields and the broader market risk sentiment, might allow traders to grab some short-term opportunities during the early North American session.

Technical levels to watch