AUD/USD retreats from weekly tops, slide to 0.7275 area

• AUD/USD struggled to preserve its modest intraday gains amid a modest USD strength.
• A more hawkish Fed, surging US bond yields helped revive the USD demand on Friday.
• A softer risk tone weighed on the perceived riskier aussie and contributed to the slide.

The AUD/USD pair extended its steady intraday descent through the early European session and refreshed daily lows, around the 0.7275 region in the last hour.

The pair struggled to find acceptance about the 0.7300 mark and witnessed a modest pullback from weekly tops, around the 0.7315 region touched earlier this Friday. A combination of factors helped revive the US dollar demand, which, in turn, prompted some selling around the AUD/USD pair.

The Fed on Wednesday indicated that it will likely begin rolling back the massive pandemic-era stimulus toward the end of this year and complete the process by mid-2020. Adding to this, the so-called dot plot revealed a growing inclination among policymakers to raise interest rates in 2022.

Prospects for an earlier interest rate hike by the Fed pushed the yield on the benchmark 10-year government bond back above the 1.4% threshold for the first time since July on Thursday. This, along with a modest pullback in the equity markets, acted as a tailwind for the safe-haven greenback.

Persistent uncertainty around the fate of debt-ridden China Evergrande Group weighed on investors' sentiment and kept a lid on the recent optimism. This was evident from a modest pullback in the equity markets, which was seen as another factor that weighed on the perceived riskier aussie.

The AUD/USD pair has now retreated around 35-40 pips from the Asian session swing highs, though any subsequent slide might continue to find decent support near the 0.7220 region. The mentioned area should act as a pivotal point and help determine the next leg of a directional move.

Market participants now look forward to Fed Chair Jerome Powell's speech amid thin US economic docket, featuring the release of New Home Sales. This, along with the US bond yields and the market risk sentiment, might influence the USD and produce some impetus to the AUD/USD pair.

Technical levels to watch