- AUD/USD gained some traction on Friday and staged a modest recovery from 11-year lows.
- A sharp turnaround in the global risk sentiment benefitted perceived riskier Australian dollar.
- Rebounding US bond yields provided an additional boost to the USD and capped further gains.
The AUD/USD pair extended its sideways consolidative price and remained confined in a narrow trading band, around the 0.6300 round-figure mark.
A combination of diverging factors failed to provide any meaningful impetus, or assist the pair to build on its attempted intraday recovery move and led to a subdued/range-bound price action through the mid-European session on Friday.
A strong recovery in the global risk sentiment, as depicted by solid gains across the global equity markets, was seen as one of the key factors extending some support to perceived riskier currencies, including the Australian dollar.
Investors’ confidence got a strong boost on the last trading day of the week after the Bank of Japan (BoJ) on injected 500 billion yen into the system via an unscheduled repo operation and later announced an unscheduled buying of JGBs.
This comes on the back of the Fed’s announcement on Thursday, saying that it will inject $1.5 trillion of temporary liquidity into the short-term funding markets and was seen as one of the key factors behind the pair’s early recovery from over 11-year lows.
Meanwhile, the risk-on flows pushed the benchmark S&P 500 to an intraday up limit of 5% and led to a goodish pickup in the US Treasury bond yields. This eventually helped the US dollar to add to the overnight strong gains and kept a lid on any further recovery.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that the pair might have actually bottomed out in the near-term and positioning for any further near-term recovery amid concerns over the coronavirus outbreak.
Technical levels to watch