AUD/USD hovers around 0.6830s after reaching a three-day high, on sentiment shift

The AUD/USD is almost unchanged on Friday, amidst a positive tone in the market, as US equities rise but remain at the brink of turning red, on sudden market sentiment shift after June’s US employment report exceeded expectations, signaling that recession fears are overblown. At the time of writing, the AUD/USD is trading at 0.6837.

Upbeat mood and a soft US dollar, a tailwind for the AUD/USD

A risk-on impulse spreads to the FX space as risk-sensitive currencies rally. The US Labor Department reported that June’s Nonfarm Payrolls added 372K jobs to the economy, more than the 268K estimated. Despite a favorable report, the Unemployment Rate remained unchanged at 3.6%, as wage growth remained firm. Traders sold off equities as a reaction that could motivate the Fed to keep hiking rates aggressively to tame inflation.

The AUD/USD reacted to the downside, printing the daily low at around 0.6791, but bounced off as investors dissected the report, breaking towards fresh three-day highs around 0.6870s. Furthermore, higher commodity prices underpinned the major, as shown by the Bloomberg Commodity Index, up 0.88%, contrarily to Iron Ore prices, down 1.22%, at $113.74 a ton.

At the time of writing, New York’s Fed President John Williams said that the central bank is 100% committed to goals and expected GDP to grow by less than 1% this year.

Elsewhere a raft of Fed speakers, namely Waller, Bullard, and Bostic, reiterated their view backing up 75 bps rate hikes in the Fed’s July meeting. They also expressed that the US economy is strong and can withstand higher rates while downplaying recession fears.

What to watch

The Australian economic calendar will feature June’s NAB Business Confidence, the July Consumer Confidence, and the Employment Report for June. On the US front, June’s Consumer Price Index (CPI), the Producer Price Index (PPI), and the University of Michigan (UoM) Consumer Sentiment would update the status of the US economy.

Also, Fed speakers will cross wires before entering the blackout period of the July monetary policy meeting.

AUD/USD Key Technical Levels