- AUD/USD witnesses some continuation selling for the second day in a row on Friday.
- Bulls seem unimpressed by aggressive RBA outlook and modest USD weakness.
- The market’s focus continues to be on the release of the latest US monthly NFP jobs report.
The pair AUD/USD maintains its selling tone during the first half of the European session on Friday and trades near a multi-day low just below 0.7100.
The pair extended the previous day’s sharp decline, from the 0.7265 region at a nearly two-week high, and witnessed some continuation selling for the second day in a row on Friday. The fall did not appear to be supported by the Reserve Bank of Australia’s monetary policy statement (RBA), which suggests that a further increase in interest rates is needed to contain inflation.
On the other hand, the US dollar retreated a bit from the two-decade high reached this Friday, although it did little to impress bulls or offer support to the AUD/USD pair. The modest pullback in the USD could only be attributed to some trading repositioning ahead of monthly US jobs report and is likely to remain limited amid aggressive expectations from the Fed.
Fed Chairman Jerome Powell had said that policy makers were ready to approve a 50 basis point increase at the next meetings. In addition, the markets expect that the Fed will have to take more drastic measures to curb the spiraling inflation and are considering an additional rate increase of 200 basis points for the rest of 2022. This continued to support elevated US Treasury yields, which should act as a tailwind for the USD.
Investors, however, appear reluctant to open aggressive positions, preferring to wait for a further boost from the US NFP. The data is expected to be consistent with tighter labor market conditions, which, along with yields from US bonds could weigh on the USD and give AUD/USD a further boost.
AUD/USD technical levels
Source: Fx Street
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