AUD/USD finds intermediate support around 0.6750 ahead of Australian Employment

• AUD/USD has found temporary support near 0.6750, however, the downside bias is still solid.
• In spite of inflation softening and loosening labor market conditions in the US, further policy tightening from the Fed cannot be ruled out.
• The Australian Dollar is expected to deliver uncertain moves ahead of the Employment data for June.

The AUD/USD pair has gauged an intermediate support around 0.6750 in the late European session. The downside bias in the Aussie asset is still solid as the US Dollar Index (DXY) has posted a decent recovery move after a week of intense sell-off.

S&P500 futures have turned choppy portraying a quiet market mood. The overall market mood is still bullish as the odds of only one more interest rate hike from the Federal Reserve (Fed) are solid. Investors are hoping that the Fed will reach the interest rate peak sooner as inflationary pressures in the United States are on softening spree.

The US Dollar Index is gathering strength for extending upside above the immediate resistance of 100.30. In spite of inflation softening and loosening labor market conditions, further policy tightening from the Fed cannot be ruled out as inflation is still far from the desired rate. Also, core inflation is extremely stubborn as the cost of services has not shown signs of easing yet. Contrary to the US Dollar Index, 10-year US Treasury yields have dropped to near 3.75%.

Meanwhile, the Australian Dollar is expected to deliver uncertain moves ahead of the Employment data for June. As per the estimates, fresh payroll additions were 15K vs. the former release of 75.9K. The Unemployment Rate is seen unchanged at 3.6%. Tight labor market conditions might force the Reserve Bank of Australia (RBA) to raise interest rates in August.

RBA Governor Philip Lowe kept policy rates unchanged in July monetary policy meeting but kept doors open for further policy tightening as inflation is at 5.6% almost thrice the required rate of 2%.

Apart from Australia’s labor market data, THE interest rate decision by the People’s Bank of China (PBoC) will be in focus. The PBoC is expected to remain dovish as the Chinese economy is going through some turbulent times. China’s economic outlook is faltering as households' demand is extremely weak.

It is worth noting that Australia is the leading trading partner of China and dovish PBoC policy would support the Australian Dollar.