The AUD/USD pair closed the previous two trading days modestly higher but lost its traction during the Asian trading hours. After dropping to a daily low of 0.7359, however, the pair managed to erase its losses and was last seen trading flat on the day at 0.7378. Earlier in the day, the data from Australia showed that the Commonwealth Bank Services PMI fell sharply to 44.2 in July's advanced estimate from 56.8 in June. Although the Manufacturing PMI stayed comfortably above 50, the Composite PMI arrived at 45.2, showing a contraction in the private sector's economic activity.

On the other hand, the US Dollar Index is moving sideways near 93.00, making it difficult for AUD/USD to make a decisive move in either direction. Later in the session, the IHS Markit's preliminary Manufacturing and Services PMI reports for July will be featured in the US economic docket. Meanwhile, the S&P Futures and Nasdaq Futures both gain around 0.5%, suggesting that the greenback could struggle to gather additional strength in the second half of the day with risk flows dominating the markets. UOB Group analysts noted that the downward pressure on AUD/USD has "more or less dissipated" following Thursday's rebound and said that they expect the pair to move sideways between 0.7320 and 0.7450 in the near term.