USD Moves Along with the Pair

The AUD/USD currency pair stepped back from a spike it had in the early North American session to the 0.7135 area. It eventually fell to a new daily low point in about an hour before putting this piece together. It was observed that the pair was moving in the area of 0.7065, going down by more than 0.60% on the day.

It was the turn of the US Dollar to see some measure of selling as it reacted to the US jobs data that came in with several mixtures. The Dollar further moved away from the high of twenty years that it initially reached early on Friday. The Non-farm Payroll headline record revealed that the US economy increased by 428,000 new jobs in the month of April.

AUD/USD price chart. Source TradingView

The addition of 428,000 jobs to the US economy is a progressive leap as it surpassed the expected 391,000 figures of the market. However, the progress from the jobs report was slightly offset by unfavorable reports on the hourly average earnings and rate of unemployment. These factors later weighed heavily on the US Dollar. 

Market Expectations Increases

After taking note of that, anticipations that the Federal Reserve is going to take a more drastic approach to bring inflation rates under firm control have helped to limit the US Dollar’s fall. As a matter of fact, the market is pricing a 200 basis points interest rate increase this year. The market’s expectation is firm, and it was encouraged by improved Treasury bond yields in the US.

The market’s expectations and less risk tone around the US Dollar drew a lot of safe-haven funds to it. The US Dollar gained all the attention of investors at the expense of the Australian Dollar, which is considered to be riskier. 

With its most recent drop, the AUD/USD currency pair has pulled back from the gains it had during the week. It is now moving well into areas where it could easily slip into the monthly low point in the vicinity of the 0.7030 area. It should be noted that the pair slid into that area on Monday.

If there are any follow-up sales, it would be considered a new trigger for bears. It would also be able to drag the price of the spot down to the psychological benchmarks of 0.7000. The AUD/USD currency pair’s trajectory downward might get extended further.

It is speculated that a further slide in the value of the pair, if not quickly salvaged, could get down to the 0.6965 area. A solid point of resistance would be required at 0.7000.

It should be recalled that the Chairman of the Federal Reserve, Jerome Powell, dismissed any move to increase interest rates beyond 50 basis points at a time.

He said that the Reserve policymakers are set to approve an increase of 50 basis points at the Federal Reserve’s next meetings. There is a reluctance on the part of investors to place aggressive bets till they see the NFP report.