• AUD/USD rebounds from the weekly low touched on Thursday, albeit lacks follow-through.
• A modest intraday USD pullback is seen as a key factor lending some support to the major.
• The Fed’s hawkish outlook, the risk-off impulse limits the USD losses and cap the Aussie.

The AUD/USD pair stages a goodish intraday recovery from a fresh weekly low touched this Thursday and rallies over 50 pips from the 0.6635-0.6630 area, though lacks follow-through. Spot prices quickly retreat a few pips from the daily top and currently trade around the 0.6665-0.6670 region, up just over 0.20% for the day.

The US Dollar (USD) pulls back from the vicinity of its highest level since June 12 touched last Friday and for now, seems to have stalled the uptrend witnessed since the beginning of the current week. This turns out to be a key factor that prompts some intraday short-covering around the AUD/USD pair. That said, the prospects for further policy tightening by the Federal Reserve (Fed), along with the risk-off impulse, help limit losses for the USD and cap the risk-sensitive Aussie.

The minutes from the June FOMC meeting released on Wednesday revealed that almost all members supported resuming rate hikes as inflation remains unacceptably high. This, in turn, reaffirms market bets for a 25 bps lift-off at the upcoming FOMC meeting on July 25-26 and leads to a further rise in the US Treasury bond yields. Adding to this, economic woes and the risk of a further escalation in the US-China trade conflict temper investors' appetite for riskier assets.

It is worth recalling that China on Monday announced fresh export curbs on two metals - widely used in semiconductors, electric vehicles and high-tech industries - to the US. The announcement raises concerns about retaliatory measures and might cause more disruption to global trade. This could further undermine already weak economic conditions, which, in turn, takes its toll on the risk sentiment and forces investors to take refuge in safe-haven assets, including the USD.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through buying before positioning for an extension of the AUD/USD pair's recent bounce from sub-0.6600 levels. Market participants now look to the US economic docket - featuring the ADP report on private-sector employment, the usual Weekly Initial Jobless Clams, the ISM Services PMI and JOLTS Job Openings data - for a fresh impetus later during the early North American session.

Technical levels to watch