AUD/USD drops for three straight days as Wall Street gains offset by risk aversion

• The US labor market eases, as Initial Jobless Claims for April 1 rise to 228K, exceeding estimates of 200K
• St. Louis Fed President Bullard notes stronger than expected Q1 data while warning of “sticky” inflation.
• US Nonfarm Payrolls are expected at 240K, while the Unemployment Rate is foreseen at 3.6%.

The AUD/USD extends its losses to three consecutive days, as Wall Street is set to finish the week with gains, except for the Dow Jones, losing 0.02%. In the FX space, risk aversion was the main driver of the session, weakening high beta currencies, like the Australian Dollar (AUD), which tumbled 0.74% vs. the buck. At the time of writing, the AUD/USD is trading at 0.6671.

AUD/USD falls below 0.6700, weighed by the risk-off sentiment in the FX market

On Thursday, the North American session was characterized by fluctuating sentiment, though US equity bulls lifted the S&P 500 and the Nasdaq. The US economic docket features Initial Jobless Claims for April 1, which jumped to 228K, above estimates of 200K, but trailed the prior’s week, which was upward revised to 246K.

Since the beginning of the week, the employment index of the US PMIs has shown signs that hiring is decelerating. That was confirmed by the US JOLTs Opening report, which showed that vacancies shifted downwards. Therefore, growing speculations for a Federal Reserve’s (Fed) pause on its tightening cycle increased.

On Wednesday, the ADP Employment Change report for March showed that companies hired fewer employees than expected. Given the backdrop, the latest US labor market data has sparked worries that an upcoming US recession is around the corner.

Hence, the AUD/USD began Thursday’s session at around 0.6730s, the day’s high. Nevertheless, it resumed its downtrend, as the release of the US Nonfarm Payrolls report and the Good Friday holiday motivated traders to book profits.

OF late, the St. Louis Federal Reserve President James Bullard commented that Q1’s incoming data is more robust than expected, adding that financial conditions are less tighter than the 2007-2009 crisis. Bullard said inflation would be “sticky going forward” and that the Fed “needs to stay at it” to get inflation back to its 2% target.

An absent Australian economic docket will leave traders focused on the release of the US Nonfarm Payrolls. The US Bureau of Labor Statistics (BLS) will release the report on April 7 at 12:30 GMT. Most banks expect the US economy to add 240K jobs after a February increase of 311K. The Unemployment Rate is estimated to stay steady at 3.6%, while Average Hourly Earnings are declining to 4.3% YoY, vs. 4.6% in February.

AUD/USD Technical Levels