• AUD/USD trims a part of its intraday recovery gains from a fresh YTD low touched on Friday.
• The USD bounces off the daily low in reaction to the stronger US PCE data and caps the pair.
• The fundamental backdrop favours bearish traders and supports prospects for further losses.

The AUD/USD pair stages a goodish rebound from sub-0.6500 levels, or the lowest level since November 2022 and maintains its bid tone through the early North American session on Friday. Spot prices, however, remain below mid-0.6500s and retreat a few pips from the daily peak following the release of the US macro data.

The US Dollar (USD) trims a part of its intraday losses in reaction to the stronger Personal Consumption Expenditure (PCE) Price Index data and acts as a headwind for the AUD/USD pair.  The US Bureau of Economic Analysis (BEA) reported that the headline PCE Price Index rose 0.4% in April as compared to 0.1% in the previous month and the yearly rate accelerated to 4.4% against expectations for a fall to 3.9% from 4.2% in March. Furthermore, the Core PCE Price Index - the Fed's preferred inflation gauge - also came in higher than consensus estimates and reaffirms speculations that the Federal Reserve (Fed) will keep interest rates higher for longer, which, in turn, lends some support to the Greenback.

Hawkish Fed expectations, meanwhile, trigger a fresh leg up in the US Treasury bond yields, which, along with the caution mood, further benefits the safe-haven buck and contributes to capping the risk-sensitive Aussie. This, to a larger extent, helps offset the disappointing release of US Durable Goods Orders data, which fell by 0.6% in April vs. a modest 0.1% rise estimated and the 3.2% (revised down from 3.5%) strong growth recorded in the previous month. With the USD bulls looking to seize back control, speculations that the Reserve Bank of Australia (RBA) might refrain from hiking interest rates in June suggest that the path of least resistance for the AUD/USD pair is to the downside.

Bearish traders, however, might prefer to wait for a sustained break and acceptance below the 0.6500 psychological mark before placing fresh bets. Nevertheless, spot prices remain on track to register heavy weekly losses and record the lowest weekly close since October 2022.

Technical levels to watch