AUD/USD marches firmly above 0.7000 as the USD weakens

• The greenback is under pressure as recession fears mount, as the Fed lifts rates to the 1.75% threshold.
• The US housing market started to weaken as Housing Starts shrank.
• Australia’s labor market strengthens and further cement a scenario of an RBA rate hike.

AUD/USD climbs during the North American session. Earlier, the major reached a daily high near 0.7035 though the rally was short-lived as traders recoiled its bullish bets, amidst a dampened market mood, with global equities falling. However, after reaching a daily low at around0.6940s, the AUD/USD bounced off that level and is gaining some 0.36%, trading at around 0.7025.

Harmful US economic data weighs on the buck

Of late, the AUD/USD pared some of its earlier losses on the back of worst-than-expected US economic data. US Housing Starts declined -by 14.4%, while Building Permits followed suit, down -by 7%. The Philadelphia Fed Manufacturing Index for June shrank for the first time, since May 2020, down -3.3 in June, against estimations of a 5.5 reading.

During the Asian session, Australia’s employment figures were better than expected. The Aussie economy added 61K new jobs to the economy, more than the 25K estimated, and the Unemployment rate held steadily around 3.9%.

Details of the report were also strong reinforcing market wagers the Reserve Bank of Australia (RBA) will deliver another half-point rate hike in July to reach 1.35%.

Analysts at ANZ said, “This continued strength in the labour market supports our view that the RBA will hike the cash rate a further 50bp in July.”

Elsewhere, US equities are plummeting, illustrating a gloomy market mood resulting from the Fed rate hike. On Wednesday, Fed Chair Jerome Powell said that although rate hikes of that size (75 bps) are not common, he reiterated that the July meeting is open for a move of that size  or 50 bps.

Meanwhile, US Treasury yields, albeit heading down, remain steady above the 3% threshold. Contrarily the greenback remains soft, as illustrated by the US Dollar Index, at 103.699, down 1.10%.

Key Technical Levels