AUD/USD recovers further from over one-month low, climbs beyond 0.6700 amid weaker USD

• AUD/USD attracts buyers for the second straight day and draws support from a combination of factors. 
• A positive risk tone and hawkish RBA expectations underpin the Aussie amid a modest USD downtick.
• Bets for smaller Fed rate cuts should limit the USD losses and cap any meaningful gains for the major. 

The AUD/USD pair builds on the previous day's bounce from the vicinity of mid-0.6600s, or over a one-month low and gains positive traction for the second straight day on Friday. The momentum lifts spot prices back above the 0.6700 mark during the first half of the European session and is sponsored by a combination of factors. 

The Australian Dollar (AUD) continues to draw support from Thursday's upbeat domestic employment details, which dashed hopes for an interest rate cut by the Reserve Bank of Australia (RBA) this year. Furthermore, the underlying bullish tone across the global equity markets prompts some profit-taking around the safe-haven US Dollar (USD), especially after the recent rally to the highest level since early August, and further benefits the risk-sensitive Aussie. 

Meanwhile, data released earlier today showed that China's economy expanded 4.6% year-on-year in the July-September period, marking the lowest reading in 18 months. The reading was below the government's full-year target of 5%, offsetting the better-than-expected Retail Sales and Industrial Production figures for September. This, in turn, might hold back traders from placing aggressive bullish bets around the China-proxy Aussie and cap the AUD/USD pair. 

Furthermore, bets for a regular 25 basis points (bps) interest rate cut by the Federal Reserve (Fed) in November, bolstered by Thursday's upbeat US macro data, should help limit any meaningful downside for the USD. This further makes it prudent to wait for strong follow-through buying beyond the 50-day Simple Moving Average (SMA) support breakpoint, around the 0.6750 area, before confirming that the AUD/USD pair has formed a near-term bottom. 

Investors now look forward to the US economic docket, featuring the release of Building Permits and Housing Starts. Apart from this, Fed Governor Christopher Waller's speech, along with the broader risk sentiment, will drive the USD demand and provide some impetus to the AUD/USD pair. Nevertheless, spot prices remain on track to register losses for the third straight week and the fundamental backdrop warrants some caution before positioning for further gains.