AUD/USD remains on the defensive below 0.7100 mark, traders await NFP report

• AUD/USD witnessed some follow-through selling for the second successive day on Friday.
• Bulls seemed rather unimpressed by RBA’s hawkish outlook and modest USD weakness.
• The market focus remains glued to the release of the latest US monthly jobs report (NFP).

The AUD/USD pair maintained its offered tone through the first half of the European session and was last seen trading near a multi-day low, just below the 0.7100 mark.

The pair extended the previous day's sharp retracement slide from the 0.7265 region, or a near two-week high and witnessed some follow-through selling for the second successive day on Friday. The downtick seemed rather unaffected by the Reserve Bank of Australia’s (RBA) hawkish Statement on Monetary Policy, suggesting a further increase in interest rates is needed to restrain inflation.

On the other hand, the US dollar eased a bit from the two-decade high touched earlier this Friday, though did little to impress bullish traders or lend any support to the AUD/USD pair. The modest USD pullback could be solely attributed to some repositioning trade ahead of the closely-watched US monthly jobs report and is likely to remain limited amid hawkish Fed expectations.

Fed Chair Jerome Powell had said that policymakers were ready to approve a 50 bps increase at upcoming meetings. Moreover, the markets expect that the Fed would need to take more drastic action to curb soaring and are pricing in an additional 200 bps rate hike for the rest of 2022. This remained supportive of elevated US Treasury bond yields, which should act as a tailwind for the buck.

Investors, however, seem reluctant to place aggressive bets and preferred to wait for a fresh catalyst from the US NFP report, scheduled for release later during the early North American session. The data is anticipated to be consistent with tightening labour market conditions, which, along with the US bond yields, might influence the USD and provide a fresh impetus to the AUD/USD pair.

Technical levels to watch