AUD/USD retreats towards 0.6950 ahead of RBA policy statement, US NFP

  • AUD/USD bulls are taking a break from a two-day uptrend, then fading lately.
  • The US dollar fell despite recession fears, mixed data and geopolitical woes.
  • Yields remained under pressure for the second day in a row.
  • RBA MPS, US NFP will be important, risk catalysts should also be watched carefully for clear guidance.

AUD/USD bulls are taking a break from a two-day uptrend, recently easing to 0.6965 as key NFP begins on Friday. The pair’s latest moves could be tied to cautious sentiment ahead of the Reserve Bank of Australia’s (RBA) key monetary policy statement (MPS), as well as the US jobs report for July. However, buyers remain hopeful in the face of widespread weakness in the US dollar.

That the RBA responded to market expectations by announcing a rate hike of 50 basis points (bps), the fourth in 2022, while inflating the benchmark rate to 1.85%. However, the RBA’s statement that reads, “The central bank is not on the predefined path of rate normalization”, seems to have attracted the AUD/USD bears after the monetary policy decision, which at its tour highlights today’s RBA MPS.

On the other hand, initial jobless claims in the United States rose to 260,000 for the week ended July 30, against 254,000 previously and 259,000 expected. Additionally, job cuts eased and German factory orders improved, while the US goods and services trade balance improved to -$79.6 billion from -$80.1 billion. of dollars according to the market consensus and -84.9 billion dollars revised before. Despite the mixed data, market participants remained hopeful of Fed aggression, but that could not lift the US dollar amid recession fears.

On Thursday, the Bank of England (BOE) formally accepted fears of recession and further hardship while Cleveland Fed Chair Lorretta Mester said recession risks had risen in the United States.

Elsewhere, Chinese military drills have led to missiles landing on Japan’s economic zone and heightened geopolitical fears, adding to US-China tension over Taiwan.

It should be noted that the Aussie’s firmer trade numbers and the absence of major examples during the visit to Taiwan by US House Speaker Nancy Pelosi, despite the verbal war, also seemed to have supported AUD/USD strength overnight.

Amid those games, Wall Street closed mixed but yields fell for the second straight day to 2.69% later, which in turn put pressure on the US Dollar ahead of key data.

Looking ahead, AUD/USD traders should wait for the RBA’s MPS for clear guidance amid fears the hawks are running out of steam. Subsequently, US Non-Farm Payrolls (NFP) for July, expected at 250,000 vs. 372,000 previously, will be crucial for AUD/USD traders to watch for clear guidance.

Also Read: Nonfarm Payrolls Preview: High Expectations Take a Hit to the Dollar, Create a Buying Opportunity

Technical analysis

AUD/USD’s successful rebound from a previous four-month support line around 0.6875 at press time directs the price to a downward sloping resistance line from April 20 and from the 100-day EMA, close to 0.7025 and 0.7040 in that order.

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