Ella 
AUD/USD rose steadily during the first half of Thursday’s European session and recovered further from the lowest level since August 16th hit the previous day around 0.6615-0.6610. This momentum lifted spot prices above 0.6650 in the last hour and was supported by a slight decline in the US dollar (USD).
The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, retreated from near three-month tops amid a corrective decline in U.S. Treasury yields. Additionally, a solid performance in equity markets also prompted profit-taking in the safe-haven U.S. dollar and benefited the risk-sensitive Australian dollar. Nonetheless, a combination of factors should limit any meaningful downside for the US dollar and keep AUD/USD depressed.
Markets have completely ruled out the possibility of more aggressive easing from the Federal Reserve, as recent U.S. macro data suggests the economy remains strong. Combined with concerns that Vice President Kamala Harris and Republican nominee Donald Trump’s spending plans will further increase the deficit, this should continue to be a tailwind for U.S. bond yields, and revive demand for the dollar.
This in turn makes it prudent to wait for strong follow-through buying before confirming that AUD/USD’s recent sharp pullback from the 0.6940-0.6945 area hit last month (or the highest levels since February 2023) is over. Lift. From a technical perspective, the overnight failure to find acceptance below the all-important 200-day moving average (SMA) warrants caution before renewing bearish bets.
Market participants now look forward to the release of the U.S. Purchasing Managers Index for October. Beyond this, US bond yields and broader risk sentiment will influence USD price dynamics, which in turn will present short-term trading opportunities for AUD/USD.
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