AUD/USD trades with modest losses below 0.7200 ahead of US data

• AUD/USD staged a correction after climbing above 0.7200.
• US Dollar Index stays below 93.00 on Friday.
• Personal Spending and Personal Income data will be released from US.

The AUD/USD pair extended its rally during the Asian session on Friday and touched its best level in nearly 18 months at 0.7228 boosted by the heavy selling pressure surrounding the greenback. With the trading action turning subdued during the European trading hours, the pair staged a correction and was last seen trading at 0.7190, where it was virtually unchanged on a daily basis.

USD struggles to find demand

After the US Bureau of Economic Analysis (BEA) reported on Thursday that the US economy shrunk by 32.9% on a yearly basis in the second quarter, the US Treasury bond yields fell sharply to weigh on the USD. The US Dollar Index (DXY) lost 0.3% on Thursday and slumped to its lowest level in more than two years at 92.55 on Friday. As of writing, the DXY was down 0.1% on the day at 92.87.

Meanwhile, the data published by the Australian Bureau of Statistics revealed that the Private Sector Credit declined by 0.2% on a monthly basis in June and the annual Producer Price Index (PPI) slumped to -0.4% in the second quarter. Nevertheless, these data had little to no action on the AUD/USD’s movements.

In the second half of the day, Personal Income and Personal Spending data will be featured in the US economic docket. Additionally, the BEA will release the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred gauge of inflation, figures.

Previewing Friday’s data from the US, “markets have priced in an extreme drop in American GDP in the second quarter,” said FXStreet analyst Joseph Trevisani. “Though these spending and income figures will be released on Friday after the GDP numbers they may be at odds with the expected economic activity in the COVID quarter.”

Technical levels to watch for