AUD/USD advances to multi-day highs around 0.6450 amid notable USD weakness

• AUD/USD gains some positive traction and rises to a multi-day high on Tuesday.
• The recovery in risk sentiment and the decline in US bond yields weigh on the dollar and support the pair.
• The Fed’s hawkish expectations limit USD losses and cap the pair’s rise amid China’s economic woes.

The pair AUD/USD attracts new buyers near the 0.6400 level on Tuesday and continues its intraday rise during the early part of the European session. The pair recovers further from the lowest level since November 2022 reached on Friday and rises to a multi-day high near 0.6450 in the last hour.

A modest recovery in global risk sentiment, bolstered by hopes for further stimulus from China, prompts some selling around the safe-haven US Dollar (USD) and benefits the risk-sensitive Australian Dollar (AUD). The dollar is also weighed down by a slightly softer tone around US Treasury yields. That being said, the prospects for further tightening of monetary policy by the Federal Reserve (Fed) should favor US bond yields and the dollar.

It is worth remembering that markets have been pricing in the possibility of a Fed rate hike of 25 basis points more by the end of this year. New US macro data continues to point to an extremely resilient economy and they should allow the Fed to keep interest rates higher for longer. The bullish outlook, in turn, lifted the yield on the 10-year US government bond to its highest level since 2007 on Monday and favors dollar bulls.

Apart of this, Concerns over worsening economic conditions in China should keep optimism and AUD at bay. This, along with expectations for another delay decision by the Reserve Bank of Australia (RBA) in September, could deter traders from taking aggressively bullish positions around the AUD/USD pair. Therefore, it will be prudent to wait for strong buying before confirming that the pair has bottomed out.

Investors may also prefer to stay on the sidelines. before the pivotal Jackson Hole Symposium, in which the comments of the president of the Fed, Jerome Powell, will be analyzed in search of clues about the future path of rate increases. This, in turn, will influence the USD price dynamics and help determine the next directional move for the AUD/USD pair. Preliminary PMI data for Australia and the United States will be released on Wednesday.

Meanwhile, the US economic calendar on Tuesday, with existing home sales and the Richmond manufacturing index, along with speeches by influential FOMC members and US bond yields, will boost demand for the USD. Additionally, risk sentiment in the markets in general should help create short-term opportunities around the AUD/USD pair.

AUD/USD technical levels to watch