AUD/USD approaches 0.6900, with a mixed mood

• AUD/USD posts minimal losses of almost 0.20% due to fragile market sentiment.
• US employment data, coupled with industrial production and retail sales, provide enough ammunition for a further Fed rate hike in September.
• The Australian employment report was softer than estimated, although the unemployment rate dipped to 3.4%.

The AUD/USD parried some losses from Wednesday, posting modest losses after bouncing off the 50 day EMA during the European session. Factors such as Fed spokespeople objecting to markets expecting a Fed rate cut in 2023, coupled with broad-based US dollar strength, keep investor sentiment mixed. At time of writing, the AUD/USD is trading at 0.6917, below its opening price, having reached a daily high of 0.6969.

AUD/USD gives in on mixed data and Fed speech
Before the open on Wall Street, the US Department of Labor revealed that jobless claims for the week ending August 13 rose by 250,000, less than an estimated 265,000, while data from the previous week they were revised downwards. That said, the week’s US economic data releases, led by industrial production, strong retail sales and a strong labor market, would further strengthen the case for additional Fed tightening.

Meanwhile, the US housing market continues to deteriorate. Existing home sales in July fell 5.9%, to a pace of 4.8 million units in July, the lowest level since May 2020, when sales hit their lowest point during the Covid-19 closures.

Elsewhere, San Francisco Fed’s Mary Daly took issue with a “dovish” tilt from the Fed, perceived by market participants in the release of FOMC minutes on Wednesday, souring sentiment. The USD remains afloat, with the dollar index rising 0.63%, above the thresholds of 107.00.

In the Asian session, a softer-than-expected Australian employment report weighed slightly on AUD/USD. The Australian Bureau of Statistics reported that the unemployment rate fell to 3.4% from an estimated 3.5%. Still, the entire employment shift cut 40,000 jobs from the economy, less than the estimated 25,000 gain.

AUD/USD dipped towards 0.6927, but money market futures continue to forecast further rate hikes by the Reserve Bank of Australia (RBA).

Other data released during the week showed that wage prices increased more modestly than estimated, which pushed Australian bond yields lower, dragging AUD/USD from 0.7000 to 0.6910.

Therefore, AUD/USD is likely to remain in a neutral bias to the downside due to a more aggressive than expected Federal Reserve.

AUD/USD Key Technical Levels