- AUD/USD attracts some buying on Friday, though any further upside seems elusive.
- China’s economic woes and the worsening US-China relations could cap the Aussie.
- Bets for more Fed rate hikes lend support to the USD and warrant caution for bulls.
- Investors now look forward to the key US NFP report for a fresh directional impetus.
The AUD/USD pair gains some positive traction during the Asian session on Friday and for now, seems to have snapped a two-day losing streak to sub-0.6600 levels, or a one-week low touched the previous day. Spot prices currently trade around the 0.6630 area, up just over 0.10% for the day, though any meaningful appreciating move still seems elusive.
A slew of weak economic data from China released over the past week added to worries about slowing growth in the world's second-largest economy. Furthermore, the risk of a further escalation in the US-China trade conflict continues to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and could act as a headwind for the risk-sensitive Aussie. The US Dollar (USD), on the other hand, attracts some buying on the last day of the week and stalls its retracement slide from the highest level since June 12 touched on Thursday, which might further contribute to capping the AUD/USD pair.
Firming expectations that the Federal Reserve (Fed) will hike interest rates again, by 25 basis points (bps) at its upcoming policy meeting on July 25-26 turn out to be a key factor lending some support to the USD. The bets were reaffirmed by the upbeat US ADP report released on Thursday, which showed that private-sector employers added 497K jobs in June, well above the 267K in the previous month and the most optimistic estimates. In a sign of further economic strength, the US ISM Serices PMI increased to 53.9 in June from 50.3 in the previous month, though the Prices Paid sub-component - a gauge of inflation - fell to more than three-year lows.
Nevertheless, the data pointed to a resilient US economy and supports prospects for a further policy tightening by the Fed. This, in turn, remains supportive of elevated US Treasury bond yields and supports prospects for a further near-term appreciating move for the USD. Traders, however, seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the release of the closely-watched US monthly employment details, popularly known the NFP report, due later during the early North American session.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD grinds higher toward 1.0900, Fedspeak eyed
EUR/USD is edging higher toward 1.0900 early Monday, helped by a better market mood. The pair also draws support from softer US Dollar and US Treasury bond yields, awaiting Fedspeak amid light European trading.
Gold price rises to a new record high, escalating geopolitical tensions in focus
Gold price gains momentum on Monday. The yellow metal hit a record high near $2,441 during the Asian session on Monday amid renewed hopes for interest rate cuts from the US Federal Reserve and rising geopolitical tensions in the Middle East.
GBP/USD advances to near 1.2700 due to rising expectations for Fed rate cuts in 2024
GBP/USD extends its gains for the second consecutive session, trading around 1.2710 during the Asian hours on Monday. A weaker US Dollar supports the pair. The Pound Sterling may face a challenge as the BoE is expected to deliver 60 basis points rate cuts in 2024.
Week Ahead: Ethereum and DeFi to come under spotlight this week Premium
Bitcoin’s attempt at a comeback has stirred the pot, causing altcoins to become volatile again. With the US Securities and Exchange Commission set to make its decision on Ethereum ETFs this week, some sectors of altcoins might see higher liquidity and volatility than others.
Will they/won’t they cut rates as commodity prices in focus
What a difference a couple of days make. One day stock markets are making record highs and banking on rate cuts, the next stocks are giving back gains and rate cut expectations are being pared back.