AUD/USD closes in on 0.7700 as USD continues to gather strength ahead of weekend

• AUD/USD is losing more than 2% on Friday.
• US Dollar Index continues to push higher as T-bond yields recover from daily lows.
• Core PCE Price Index in US stayed unchanged at 1.5% in January.

After recovering toward 0.7800 in the early American session, the AUD/USD pair lost its traction and dropped to its lowest level in more than two weeks at 0.7711. As of writing, the pair was down 2.01% on a daily basis at 0.7715.

DXY extends rally toward 91.00

The unabated USD strength continues to weigh on AUD/USD ahead of the weekend. Although the US Dollar Index (DXY) erased a portion of its daily gains earlier in the day with the US Treasury bond yields staging a deep correction, it reversed its direction and jumped to its highest level in a week at 90.82.

A rebound witnessed in T-bond yields seems to be providing a boost to the USD. Currently, the yield on the benchmark 10-year reference, which lost as much as 4% earlier in the day, is down 1.8% and the DXY is up 0.75% at 90.80.

The data published by the US Bureau of Economic Analysis showed on Friday that the Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, remained unchanged at 1.5% on a yearly basis in January. Nevertheless, this reading failed to trigger a meaningful market reaction.

Other data showed that Personal Income and Personal Spending increased by 10% and 2.4%, respectively. Finally, the University of Michigan's Consumer Sentiment Index arrived at 76.8 in February's final reading, compared to analysts' estimate of 76.5.

Technical levels to watch for