AUD/USD finds intermediate support around 0.6750 awaiting Australian employment

• AUD/USD has found temporary support near 0.6750, although the downtrend remains strong.
• Despite the moderation in inflation and easing labor market conditions in the US, further tightening of the Fed’s monetary policy cannot be ruled out.
• The Australian dollar is expected to show uncertain moves ahead of the June Employment data.

The pair AUD/USD it has fallen towards intermediate support around 0.6750 in the last hours of the European session. The downside bias in the AUD remains strong as the Dollar Index (DXY) has made a decent recovery move after a week of intense selling.

S&P 500 futures have turned choppy, reflecting the calm in the market. Overall market sentiment remains bullish as the chances of a one more rate hike by the Federal Reserve (Fed) are strong. Investors are hoping the Fed will cap interest rates sooner as inflationary pressures in the US are easing.

The Dollar Index is gaining strength to extend higher above the immediate resistance at 100.30. Despite the easing of inflation and easing labor market conditions, further Fed tightening cannot be ruled out as inflation is still far from the desired rate. On the other hand, core inflation remains very reticent, since the cost of services has not yet shown signs of moderation. Contrary to the Dollar Index, the 10-year US Treasury yield has fallen to around 3.75%.

Meanwhile, the Australian dollar is expected to register uncertain moves ahead of the June jobs data. According to estimates, the new payrolls were 15,000 versus the previous release of 75,900. The unemployment rate remains at 3.6%. Tight labor market conditions could force the Reserve Bank of Australia (RBA) to raise interest rates in August.

RBA Governor Philip Lowe kept interest rates unchanged at the July policy meeting, but left the door open for further policy tightening as inflation stands at 5.6%, almost triple the required rate of 2%.

Aside from Australian labor market data, the People’s Bank of China (PBoC) interest rate decision will be in the spotlight. The PBOC is expected to remain subdued as the Chinese economy is going through turbulent times. China’s economic outlook is faltering as demand from households is extremely weak.

It should be noted that Australia is China’s main trading partner and the dovish policy of the PBOC would support the Australian dollar.