AUD/USD retreats further from multi-week tops, below 0.7300 mark

• AUD/USD witnessed a modest pullback from over three-week tops amid sustained USD buying.
• Bulls largely shrugged off upbeat Chinese Services PMI and the prevalent risk-on environment.
• Investors’ focus remains glued to Friday’s release of the closely-watched US monthly jobs data.

The AUD/USD pair extended its steady intraday descent through the early European session and dropped to fresh daily lows, further below the 0.7300 mark in the last hour.

The pair witnessed a modest pullback from the 0.7325 region and has now eroded a part of the previous day's gains to over three-week tops amid sustained US dollar buying. Bulls seemed rather unimpressed by upbeat Chinese Services PMI, which indicated a sharp expansion in the business activity in September and rose more than expected to 53.4. Even the prevalent risk-on mood failed to lend any support to the perceived riskier aussie.

The already stronger global risk sentiment got an additional boost after the Senate voted 50-48 to extend the debt ceiling until early December and avoid a default on the US government debt. This, however, did little to dent the bullish sentiment surrounding the safe-haven USD, which remained well supported by rallying US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond shot to four-month tops on Friday.

The US bond yields have been scaling higher since late September when the Fed signalled that it would begin tapering its bond purchases by the end of 2021. The markets also seem to have started pricing in the possibility of an interest rate hike in 2022 amid worries that the recent surge in oil/energy prices will stoke inflation. This further contributed to the spike in the bond yields and continued acting as a tailwind for the greenback.

Apart from this, the downtick could further be attributed to some repositioning trade ahead of Friday's release of the closely-watched US NFP report. The data will influence market expectations about the likely timing of the Fed's tapering plan. This, in turn, will influence the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair.

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