AUD/USD exposes to further downside as US employment additions outperform estimates

• AUD/USD is expected to extend its downside below 0.6565 amid the upbeat US ADP employment report.
• The USD Index drives higher as the stellar addition of private payrolls would set a positive undertone for Fed policy.
• RBA Lowe kept doors open for more interest rates as inflation will take time to return to 2% amid the tight labor market.

The AUD/USD pair prepares to extend losses below the immediate support of 0.6565 as the United States Automatic Data Processing (ADP) reports that employment additions were higher than expectations. The US labor market witnessed an addition of fresh 324K private payrolls, significantly higher than the estimates of 189K but lower than the former release of 497K.

The US Dollar Index (DXY) delivers a breakout of the consolidation formed around 102.10 as upbeat labor market conditions have propelled hopes of one more interest rate hike from the Federal Reserve (Fed).

ADP Employment data set a positive undertone for the US Nonfarm Payrolls (NFP) data for July, which will be published on Friday at 12:30 GMT. According to the estimates, the economic data is seen at 200K, slightly lower than the former reading of 209K. The Unemployment Rate is expected to remain steady at 3.6%. Apart from the employment additions, investors will keenly focus on the Average Hourly Earnings.

Expectations state that labor earnings gained at a pace of 0.3% in July, lower than the former pace of 0.4%. The annual data is expected to decelerate to 4.2% against the former release of 4.4%.

On the Australian Dollar front, the Reserve Bank of Australia (RBA) kept interest rates unchanged at 4.1%. RBA Governor Philip Lowe kept doors open for more interest rates as inflation will take time to return to 2% amid a tight labor market. Over the inflation outlook, the central bank forecasted that inflation will return to 2-3% by late 2025.