AUD/USD retreats from monthly top to 0.7250 on mixed Aussie data, sentiment ahead of US NFP

AUD/USD bulls take a breather around 0.7250, after refreshing the six-week high, amid the market’s indecision on early Friday. In doing so, the Aussie pair consolidates the biggest daily gains in two weeks as mixed Aussie data joins the cautious mood ahead of the US jobs report for May, as well as headlines concerning Australia’s biggest customer China.

Australia’s AiG Performance of Construction Index eased to 50.4 versus 55.9 in May. Also softer were the figures relating to the Aussie Home Loans and Investment Lending for Homes for April, down -5.8% and -4.8% versus 0.9% and 2.9% respective priors.

Alternatively, S&P Global Services PMI for May rose beyond the 53.0 expected and previous readings to 53.2. On the same line was the S&P Global Composite PMI which grew to 52.9 from 52.5 during the stated month.

Elsewhere, comments from Deputy US Trade Representative (USTR) Sarah Bianchi seemed to have offered the latest challenge to market sentiment as the diplomat said, “USTR is seeking a 'strategic realignment' with China, tariff structure that 'makes sense'.” The positive mood, however, was challenged by statements like, “‘All options are on the table’ regarding tariff decisions on Chinese imports.” Additionally, China’s Foreign Ministry spokesman Zhao Lijian conveyed dislike for the US’ law banning imports from Xinjiang and raise challenges for AUD/USD prices.

It should be noted that downbeat early signals for today’s US job numbers joined sluggish yields to weigh on the US dollar the previous day. That said, the US Dollar Index (DXY) dropped the most in a fortnight as market players took relief from softer US data, after two consecutive days of hawkish Fed scenario. On Thursday, the US ADP Employment Change eased to 128K for May, versus 300K forecasts and a downwardly revised 202K previous reading. The Weekly US Initial Jobless Claims, on the other hand, dropped to 200K compared to 210K anticipated and 211K prior. Further, Nonfarm Productivity and Unit Labor Costs both improved in Q1, to -7.3% and 12.6% respectively, compared to -7.5% and 11.6% figures for market consensus. Furthermore, US Factory Orders for April softened to 0.3%, from a revised 1.8% in March and 0.7% forecast.

Against this backdrop, the S&P 500 Futures print mild gains but the US Treasury yields pause the previous fall around 2.92%, suggesting the market’s cautious optimism. That said, the Wall Street benchmarks rose the most in a week whereas the bond coupons remained pressured on Thursday.

Moving forward, holidays in China and the UK may join the pre-NFP anxiety to restrict immediate AUD/USD moves. However, expectations of likely softer US data may keep buyers hopeful. That said, the headline US NFP is expected to ease to 325K versus 428K prior whereas the ISM Services PMI may retreat from 57.1 to 56.4.

Also read: Nonfarm Payrolls Preview: It is all about the money, three scenarios for wage growth and the dollar

Technical analysis

Despite the latest pullback, the successful break of 200-DMA and 100-DMA, respectively around 0.7260 and 0.7230, joins the firmer RSI to keep the AUD/USD buyers hopeful of poking the 0.7315 hurdle, comprising the resistance line of a three-week-old rising channel.