AUD/USD struggles near 0.6425 area, just above multi-month low ahead of US NFP

AUD/USD attracts fresh sellers and is pressured by a combination of factors.
A softer risk tone and bets for an early RBA rate cut undermine the Aussie.
Subdued USD demand fails to lend any support ahead of the US NFP report.

Haresh Menghani FXStreet

The AUD/USD pair maintains its offered tone through the first half of the European session on Friday and currently trades near the 0.6425 region, down around 0.40% for the day.

Spot prices remain close to the lowest level since August touched on Wednesday and seem vulnerable, though bearish traders opt to wait for more cues about the Federal Reserve's (Fed) rate-cut path before placing fresh bets. Hence, the focus will remain glued to the US Nonfarm Payrolls (NFP) report. The crucial jobs data will guide the Fed policymakers' decision at the December meeting and drive the US Dollar (USD) demand, which, in turn, should provide a fresh impetus to the AUD/USD pair.

Heading into the key data risk, expectations for a less dovish Fed, along with a slight deterioration in the global risk sentiment, help limit the recent USD decline to a three-week low and act as a headwind for the perceived riskier Australian Dollar (AUD). Apart from this, rising bets for an early interest rate cut by the Reserve Bank of Australia (RBA), bolstered by this week's softer domestic GDP growth figures released earlier this week, contribute to the offered tone surrounding the AUD/USD pair.

Apart from this, persistent geopolitical tensions, China's economic woes and concerns about US President-elect Donald Trump's lingering trade tariffs suggest that the path of least resistance for the risk-sensitive Aussie is to the downside. Hence, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Nevertheless, the AUD/USD pair seems poised to register weekly losses and could possibly post its lowest 2024 weekly close.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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