AUD/USD justifies risk-barometer status around 0.6670 as recession woes loom, US NFP eyed

AUD/USD stays on the bear’s radar even as Good Friday-inflicted inaction prods the pair traders after a three-day downtrend. In doing so, the Aussie pair bears the burden of the recession woes, as well as the dovish Reserve Bank of Australia (RBA) move, as it braces for the weekly loss ahead of the key US Nonfarm Payrolls (NFP).

The Aussie pair dropped in the last three consecutive days while aptly justifying the market’s pessimism surrounding the economic transition in the world’s largest economy, namely the US, as well as the contagion fears emanating from the same. Apart from the US-induced recession woes, RBA’s halt to the rate hike cycle and mixed Aussie data also weigh on the AUD/USD prices.

On Wednesday, Australia’s headline Trade Balance improved to 13,870M versus 11,100 expected and 11,688M prior. However, Exports and Imports both dropped to -3.0% and -9.0% compared to 1.0% and 5.0% respective priors. Further, China’s Caixin Services PMI rallied to 57.8 versus 54.0 expected 55.0 prior. In doing so, the China data rallied to the highest level since November 2020.

It’s worth noting that US Initial Jobless Claims improved to 228K for the week ended on March 31 versus 200K expected and upwardly revised 246K prior. It’s worth noting that the Challenger Job Cuts for the said month rose to 89.703K from 77.77K prior. Previously, US JOLTS Job Openings dropped to the 19-month low in February while the ADP Employment Change for March also disappointed markets with 145K figures. Further, the US ISM Services PMI for March also amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

In addition to what’s mentioned above, geopolitical fears surrounding the US-China ties also weigh on the AUD/USD prices due to Canberra’s trade links with Beijing. Recently, the dragon nation showed a dislike of US-Taiwan relations and raised fears of worsening relations among the world’s top two economies, namely the US and China. On the same line are the Ukraine-Russia war and Moscow’s tussle with the West, as well as North Korea’s warning to use nuclear powers

Amid these plays, the Wall Street benchmarks lick their wounds while the US 10-year and two-year Treasury bond yields also stay pressured, despite the latest consolidation around 3.30% and 3.83% in that order.

Moving ahead, the Good Friday holidays in major markets can restrict AUD/USD moves. However, the presence of the US jobs report can trigger volatility, especially amid thin market presence, which in turn requires more caution from the traders. Market forecasts suggest a softer print of the headline Nonfarm Payrolls (NFP), to 240K from 311K prior, as well as no change in the Unemployment Rate of 3.6%. However, the mixed expectations for the Average Hourly Earnings make the outcome even more interesting.

Technical analysis

A daily closing below the 0.6680-85 support confluence, now immediate resistance comprising a one-month-old ascending trend line and the 21-DMA, keeps AUD/USD bears hopes of witnessing further downside.