AUD/USD trades with modest losses, bears await a sustained break below 0.7100 mark

• AUD/USD witnessed some selling after rising to fresh one-week tops, around the 0.7135-40 region.
• The prevalent cautious mood benefitted the safe-haven USD and exerted some pressure on the pair.
• Dovish RBA expectations undermined the aussie and contributed to the pair’s pullback from highs.

The AUD/USD pair was seen hovering near the lower end of its daily trading range, with bears awaiting a sustained weakness below the 0.7100 round-figure mark.

The pair failed to capitalize on its early uptick to fresh one-week tops, instead met with some fresh supply near the 0.7135-40 region and has now drifted into the negative territory. The underlying caution in the financial markets extended some support to the safe-haven US dollar and was seen as a key factor exerting some pressure on the perceived riskier Australian dollar.

With less than two weeks to go before the US presidential election, investors remained on the sidelines and awaited a breakthrough in the US stimulus talks. On Thursday, US House of Representatives Speaker Nancy Pelosi reported progress in the legislation for another round of financial aid and said that the aid bill could be passed in the House before the election day.

Market participants, however, seemed unconvinced that the bill could actually pass through the Senate amid strong opposition from Republicans over a bigger stimulus bill. This, coupled with the uncertain US political environment, further weighed on investors' sentiment and benefitted traditional safe-haven assets, including the greenback.

On the other hand, increasing bets that the RBA will cut interest rates in November further undermined the aussie. The AUD/USD pair, for now, seems to have stalled this week's goodish recovery move from the 0.7020 region, or four-week lows touched on Tuesday and remains on track to end the week with modest gains. This makes it prudent to wait for some strong follow-through selling before positioning for any further near-term depreciating move.

Technical levels to watch