AUD/USD recovers following weak NFPs from the US

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• AUD/USD cleared most of the last two session’s losses and is poised for a weekly gain.
• NFPs from the US from June came in at 209K lower than expected, while wage growth remained healthy.
• Lower US yields weight on the USD.

On Friday, the AUD/USD surged to the 0.6680 area as the USD weakened following weak Nonfarm Payrolls from June. However, wages accelerated, which should maintain steady hawkish bets on the Federal Reserve and limit the USD’s losses.

US reported lower-than-expected NFPs and accelerating salaries

The US Bureau of Labor Statistics released that the Nonfarm Payrolls from the US from June, and results were lower than expected. In that sense, the report stated that the US gained 209K jobs in June vs the 225k expected and lower than the previous figure of 306K. Wage growth remained healthy at 0.4% MoM, above the 0.3% expected, while the Unemployment rate stood at 3.6%.

Following the data, US Treasury yields decreased across the board. The 2-year yield fell by more than 1.70% to 4.90%, while the 5 and 10-year rates to 4.29% and 4.02%, respectively. That being said, markets are assessing the Federal Reserve’s next steps as Jerome Powell stated that further tightening may be required driven by a tight labour market. However, as salaries aren’t declining, they pressure the Fed to maintain its hawkish stance and contemplate further tightening.

As for now, according to the CME FedWatch Tool, investors continue to fully discount a 25 basis points hike in the July meeting of the Fed which would take the rates to the 5.25%-5.50% range. All eyes are now on next Wednesday’s Consumer Price Index (CPI) data from June from the US, which will continue modelling the expectations for the next Fed decision.

AUD/USD Levels to watch

The daily chart indicates that the outlook for the Aussie has improved, but still the bigger picture suggests that the sellers are in control. The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) still hold negative territory while the pair trades below the 20, 100 and 200-day Simple Moving Averages.

Resistance Levels to watch: 0.6685 – 0.6696 area (convergence of the 100 and 200-day SMAs), 0.6730 (20-day MA)
Support Levels to watch: 0.6630,0.6600,0.6570.

AUD/USD Daily chart