AUD/USD recovers further from multi-week lows, climbs to 0.7315 region

• The risk-on mood prompted some USD profit-taking and assisted AUD/USD to gain traction.
• Hawkish Fed expectations should help limit the USD pullback and cap the upside for the pair.

The AUD/USD pair extended its steady intraday ascent through the early European session and climbed to fresh daily tops, around the 0.7315 region in the last hour.

The pair managed to gain some positive traction on the last trading day of the week and recovered a major part of the previous day's slump to three-week lows. The underlying bullish sentiment prompted some profit-taking around the safe-haven US dollar, which, in turn, was seen as a key factor that benefitted the perceived riskier aussie.

Apart from this, the uptick lacked any fundamental catalyst and runs the risk of fizzling out quickly amid expectations for an imminent Fed taper announcement. Despite worries about the fast-spreading Delta variants, the US Retail Sales report released on Thursday underscored consumer confidence and pointed to the continuation of economic recovery.

The data fueled speculations that the Fed would begin rolling back its massive crisis-era stimulus sooner than later. This should continue to act as a tailwind for the greenback and keep a lid on any meaningful upside for the AUD/USD pair. Hence, it will be prudent to wait for some follow-through buying before positioning for any further gains.

Market participants now look forward to the release of the Prelim Michigan US Consumer Sentiment Index, due later during the early North American session. The data could influence the USD and provide some impetus to the AUD/USD pair. Traders might further take cues from the broader market risk sentiment and produce some opportunities around the major.

Technical levels to watch