AUD/USD erases early recovery gains, trades around 0.7420 ahead of US data
- AUD/USD struggles to preserve its recovery momentum on Friday.
- US Dollar Index rises toward 92.70 ahead of US data.
- Wall Street's main indexes look to open modestly higher.
The AUD/USD pair lost more than 30 pips on Thursday and staged a modest rebound during the Asian trading hours on Friday. However, the pair seems to be having a difficult time preserving its bullish momentum and was last seen posting small daily losses at 0.7423.
In the absence of high-tier macroeconomic data releases, the USD's market valuation continues to impact AUD/USD's movements ahead of the weekend. Following Wednesday's sharp decline, the US Dollar Index (DXY) gained 0.2% on Thursday and continues to push higher on Friday, limiting AUD/USD's upside. At the moment, the DXY is rising 0.12% at 92.66.
Later in the session, the US Census Bureau will release the June Retail Sales data and the University of Michigan will publish the preliminary Consumer Sentiment Index for July.
Meanwhile, US stock index futures are trading modestly higher on Friday, suggesting that Wall Street's main indexes could open in the positive territory and provide support to AUD/USD.
AUD/USD near-term outlook
FX strategists at the UOB Group think that there is scope for AUD to drop below 0.7400 in the near term.
"The bias still appears to be tilted to the downside but AUD has to close below 0.7400 before a sustained decline can be expected," analysts said. "There is no change in our view for now even though the prospect for AUD to move clearly below 0.7400 has increased. Looking ahead, the next major support below 0.7400 is at 0.7350."
AUD/USD: Extra losses below the 0.7400 level – UOB.
Additional levels to watch for