AUD/USD falls to multi-month lows below 0.6500 awaiting US labor market data.

• The AUD/USD pair fell to its lowest level since November 2022.
• Australia’s monthly Consumer Price Index accelerated in April.
• Investors are awaiting data from the US labor market.

The Australian dollar fell to multi-month lows on the strength of the US dollar and uncertainties surrounding US labor market data and the debt limit bill facing resistance in Congress. On the other hand, Australian inflation in April picked up a bit, but bond yields are coming down, adding more pressure on the Australian dollar.

Australian and US yields are weak ahead of NFP data

Following the release of a sharp drop in Australian building permits on Monday, down 8% versus an expected 2% rise, Australian yields continue to fall. The 10-year bond yield stands at 3.60%, with a loss of 0.24%. The 2-year yield is currently at 3.55%, down 0.51%, while the 5-year yield stands at 3.37%, down 0.24%.

On the opposite side, US bond yields are falling, indicating bearish market sentiment fueled by higher demand for US bonds. The 10-year yield fell back to 3.66%, a loss of 1.13%, while the 2-year yield stands at 4.38%, reflecting a decline of 2.12%. Similarly, the 5-year yield stands at 3.77%, with losses of 1.33%.

That being said, the US bond market could experience some volatility ahead of the release of key US labor market data. On Thursday, Automatic Data Processing Inc. will release May employment change numbers and on Friday, the US Bureau of Labor Statistics will release nonfarm payrolls (NFP) for the same month. In this sense, it is expected that both reports point to a further deterioration in the US labor market, which could have an impact on the next decision of the Federal Reserve (Fed). For now, market participants expect a 25 basis point (bp) rise.

On the other hand, in the US, the JOLTS job offers for April were published on Wednesday, which stood at 10.10 million, compared to the 9.37 million expected. For the remainder of the session, investors will be watching the release of the Fed’s Beige Book to better understand the current economic situation in the United States.

Levels to watch

The AUD/USD pair has a short-term bearish outlook as indicators on the daily chart suggest sellers have the upper hand, while the pair trades well below its main Simple Moving Averages (SMAs).

Also, if the Aussie continues to lose ground, immediate support levels are seen at the 0.6440 area, followed by the 0.6300 area, and then the 0.6250 level. On the other hand, should the Aussie gain traction, the next line of resistance lies at the 0.6500 area followed by the 0.6550 and 0.6600 levels.