AUD/USD bears stay in dominant position below 0.6800, US NFP, RBA eyed

• AUD/USD holds lower ground after refreshing multi-day bottom, pauses three-week fall.
• Grim concerns surrounding China, downbeat data at home lead the bears.
• Strong yields, upbeat US statistics propel hawkish Fed bets and underpin US dollar demand.
• No major data at home but US jobs report for August will be crucial ahead of next week’s RBA.

AUD/USD licks its wounds at the lowest levels since mid-July as traders await the key US jobs report during early Friday morning in Asia. In doing so, the Aussie pair pauses the three-day downtrend while taking rounds to 0.6780-90 of late.

In addition to the strong run-up in the US Treasury yields, grim concerns from China and downbeat Aussie data offered an extra bearish blow to the AUD/USD prices. That said, the pair’s latest inaction could be linked to the pre-event anxiety.

A covid-led lockdown in China’s Chengdu city joins downbeat Caixin Manufacturing PMI to portray grim conditions for the world’s second-largest economy. On the same line could be the escalating geopolitical tension between Beijing and Washington, via Taiwan.

At home, the final readings of Australia’s S&P Global Manufacturing PMI for August dropped below 54.5 initial estimates to 53.8. Before that, the nation’s AiG Performance of Manufacturing Index marked the first activity contraction in seven months with 49.3 numbers, versus 52.5 prior, for the said month.

It should be noted that the firmer prints of the US ISM Manufacturing PMI and the last prints of the S&P Manufacturing PMI for August joined hawkish Fedspeak to propel the bets on the Fed’s next big rate hike, which in turn fuelled the US Treasury yields towards the fresh multi-month top.

The US ISM Manufacturing PMI reprinted the 52.8 figure for August versus the market expectations of 52.0. Further, the final reading of S&P Manufacturing PMI for August rose past 51.3 initial estimates to 51.5, versus 52.2 prior final for July. On the same line, US Initial Jobless Claims dropped to 232K versus 248K forecast and 237K prior. Further, the Unit Labor Cost rose 10.2% QoQ during the second quarter (Q2) versus 10.7% expected while Labor Productivity dropped by 4.1% during Q2 versus the anticipated fall of 4.5% and -4.6% prior.

Elsewhere, Atlanta Fed President Raphael Bostic said that the Fed has work to do with inflation, a 'long way' from 2%. Also, the newly appointed Dallas Fed President Lory Logan joined the lines of hawkish fellow US central bankers while saying, “Restoring price stability is No. 1 priority.”

Amid these plays, Wall Street closed mixed but the US 10-year Treasury yields rose to the highest levels since late June. More importantly, the 02-year counterpart jumped to the 15-year top.

Looking forward, the markets are likely to witness anxiety ahead of the key US Nonfarm Payrolls (NFP) and Unemployment Rate for August, expected 300K and 3.5% versus 528K and 3.5% respective priors. Should the job report print firmer data, the odds of witnessing further US dollar strength can’t be ruled out.

Following that, the next week’s monetary policy meeting of the Reserve Bank of Australia (RBA) will be important amid recent downbeat concerns for Canberra.

Also read: Nonfarm Payrolls Preview: Five reasons to expect a win-win release for the dollar

Technical analysis

AUD/USD pair’s sustained trading below May’s low surrounding 0.6830-25 directs the bears towards the yearly low near 0.6680. However, the 0.6760 and the 0.6700 threshold may offer intermediate halts during the south run.