AUD/USD grinds lower, below 0.6800 ahead of US NFP

AUD/USD falls to seven-week lows on Thursday amidst a risk-off impulse,  while the US dollar, as shown by a measure of the greenback’s value against a basket of peers, namely the US Dollar Index, rises to 20-year highs around 109.997. At the time of writing, the AUD/USD exchanges hands at 0.6786.

US equities remain downbeat, a reflection of investors’ mood. US economic data led by the ISM Manufacturing PMI for August, which measures factory activity in the US, rose by 52.3, aligned with the previous month’s readings, above estimates, bolstering the greenback to new YTD highs. Also, US unemployment claims, known as Initial Jobless Claims, rose by 232K, lower than the 248K foreseen by analysts.

The AUD/USD plunged from around 0.6830 to the day’s lows at 0.6771. US employment indicators cement the Fed’s intentions of hiking rates aggressively at the September meeting.

Another factor weighing on risk sentiment and the Australian dollar is China’s Covid-19 lockdowns in Chengdu, which put 21.2 million residents in lockdown. Furthermore, China’s Caixin PMI for August. Contracted, fueling expectations that its economic slowdown could spread worldwide, a sign that could trigger a global recession.

What to watch

An absent Australian economic docket would leave AUD/USD traders leaning on US dollar dynamics. The US calendar will feature August’s Nonfarm Payrolls report, alongside the Unemployment Rate, and Average Hourly Earnings

AUD/USD Price Analysis: Technical outlook

The AUD/USD extended its losses for the third straight day, approaching a five-month-old downslope trendline, broken around July 27, which would turn support. If AUD/USD buyers stop the losses above the YTD low at 0.6681, an inverse head-and-shoulders chart pattern could form. Otherwise, the downtrend would resume, and AUD/USD sellers will target the May 15, 2020, lows at 0.6402.