AUD/USD slips from YTD high as stronger US Dollar and wedge rejection weigh on outlook

• AUD/USD slips from YTD high as rising US yields lift demand for the US Dollar.
• US Dollar gains traction on trade optimism and steady Fed expectations.
• AUD/USD rejection at wedge resistance raises downside risks below 0.6600.

The Australian Dollar (AUD) is losing ground against the US Dollar (USD) on Friday, pressured by rising US Treasury yields that continue to support demand for the Greenback.

After climbing to a year-to-date high of 0.6625 on Thursday, AUD/USD has slipped, trading below 0.6600 at the time of writing.

Market sentiment toward the US Dollar has improved. While President Donald Trump continues to criticize the Federal Reserve (Fed) for not cutting rates, his reassurance that Chair Jerome Powell will remain in his position has helped ease investor concerns.

That, combined with encouraging trade developments and resilient US economic data, has kept upward momentum behind the USD.

Attention is now shifting to upcoming trade negotiations and central bank decisions.

Talks between US Treasury Secretary Scott Bessent and Chinese officials are set to begin Sunday in Stockholm and will run through Tuesday, with both sides aiming to build on the current trade agreement. Meanwhile, investors are also eyeing signs of progress in potential trade discussions between the US and the EU.

Looking ahead, next week's focus will turn to the Fed's rate decision on Wednesday. Markets broadly expect the Fed to hold rates steady within the 4.25%-4.50% range.

AUD/USD technical analysis: Rejection at resistance raises downside risks

As for the AUD/USD pair, part of the recent pullback may be driven by profit-taking after the sharp rally.

On the daily chart, price action remains contained within an ascending wedge pattern. Thursday's move to 0.6625 marked an eight-month high, touching resistance at the top of the wedge. However, the pair failed to break higher, prompting sellers to step in.

The rejection at the recent high is technically significant. Thursday's candle shows a long upper wick, signaling fading bullish momentum. The current session is forming a full-bodied bearish candle, reinforcing the reversal and suggesting the possibility of further downside.

AUD/USD daily chart

For bears to build momentum and shift the trend, initial support lies at 0.6550, a prior resistance level now acting as horizontal support.

A break below this would bring the 50-day Simple Moving Average (SMA) into focus at 0.6508, followed by the July swing low at 0.6454.

If downside pressure deepens, the next levels to watch are the 200-day SMA near 0.6393 and the June swing low, which aligns with rising wedge support at 0.6372.

On the bullish side, a decisive close above 0.6625 would indicate a breakout from the wedge pattern, opening the door for further gains toward the November high at 0.6687.