“AUD/USD Validates Risk Status at 0.6670 as Recession Fears Rise: Will US NFP Respond?”

AUD/USD remains under pressure after a three-day losing streak, with eyes on reversing previous weekly gains. The downbeat US data, disappointing Fed research renewing recession woes have kept the AUD/USD depressed. The RBA’s pause to the rate hike trajectory is also attracting Aussie pair sellers, even as Governor Lowe and mixed data prod bears. US employment statistics in the coming week, amid Good Friday-induced lack of liquidity, could trigger an AUD/USD rebound if the outcome is downbeat.

The Aussie pair has dropped in the past three consecutive days, effectively justifying the market’s pessimism surrounding the economic transition in the world’s largest economy, namely the US, and the contagion fears emanating from it. Additionally, RBA’s halt to the rate hike cycle and mixed Aussie data weighs on AUD/USD prices.

On Wednesday, Australia’s headline Trade Balance improved to 13,870M, versus 11,100 expected and 11,688M prior. This comes as Exports and Imports both dropped to -3.0% and -9.0%, compared to 1.0% and 5.0% respective priors. Additionally, China’s Caixin Services PMI rose to 57.8, versus 54.0 expected and 55.0 prior, leading the China data to rally to the highest level since November 2020.

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

Geopolitical fears surrounding US-China ties also weigh on 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 between the world’s top two economies, namely the US and China. The Ukraine-Russia war and Moscow’s tussle with the West, as well as North Korea’s warning to use nuclear powers, add to these tensions.

Due to these factors, Wall Street benchmarks are licking their wounds, while the US 10-year and two-year Treasury bond yields also remain pressured, despite the latest consolidation around 3.30% and 3.83%, respectively.

Looking ahead, the Good Friday holidays in major markets could restrict AUD/USD moves. However, the release of the US jobs report could trigger volatility, especially amid thin market presence, which requires more caution from 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.

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 hopeful of witnessing further downside.


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