AUD/USD touches two-day highs on weaker US dollar

The AUD/USD broke above 0.6920 and jumped to 0.6957 on Friday, reaching the highest level in two days. Stocks are sharply surging and this helps the Australian dollar.

Despite recession fears, investors flocked to stocks. US stocks indexes are up by more than 2%, extending weekly gains. Negative economic data did not impact the market sentiment and kept US yields far from the recent peak, weakening the dollar.

The AUD/USD recovered from weekly lows under 0.6900, erasing weekly losses. The short-term outlook for the Australian dollar improved. Above 0.6950 the next resistance stands at 0.6990, the last defense to 0.7000. A decline back under 0.6925 would expose the weekly low around 0.6870.

The economic calendar for Australia show May’s retail sales numbers due on Wednesday. While consumer sentiment has slumped give rising inflation and a lower confidence around the economic outlook, household balance sheets are in good shape.

Strong labour market could keep household spending elevated. A strong retail beat will boost the case for another aggressive move by the RBA in July after their outsized 50bps hike.