AUD/USD is losing the bid as US dollar bounces back

• AUD/USD bulls back off as the US dollar firms up again. 
• Aussie jobs will be a key event for this week, as will the RBNZ.

At 0.7458, AUD/USD remains in bullish territory, higher by some 0.6% but is losing steam as the greenback recovers in afternoon New York trade. The US dollar, as measured by the DXY index, is above the 100 level again after being below it at 99.74 the low for the start of the trading session. 

We have seen a strong turnaround in the US dollar as money markets rethink the outlook for the Federal Reserve despite the Core Consumer Price Index, which excludes food and energy prices, that moved up by just 0.3%, which was below the 0.5% expectations and the smallest increase since September. 

The US Treasury's 10-year auction hit a high yield of 2.72% on Tuesday, up from the 1.92% high in the previous month. The bid to cover ratio for the auction was 2.43, down from the 2.47 ratio in March and the 10-year yield is recovering from the lows of the day.

Therefore, with inflation expectations remaining fairly steady, the US yield can continue higher and if it moves beyond the 2.836% high, it will on track to test the October 2018 high near 3.26%. This would leave the bias to the upside for the greenback as Fed officials are likely to remain hawkish. the market expectations are still for a 50 bp hike next month and this will potentially keep the US dollar on track for the March 2020 high near 103.

Domestically, it is an important week for the antipodeans. For AUD, the Aussie Employment report will be key, but a close eye will also be paid to its neighbouring central bank, the Reserve Bank of New Zealand. A 50% rate hike to the OCR could tip the balance in favour of AUD again, especially given the miss in the Core CPI data for the US today. 

As for the Aussie Employment, ''we are expecting another strong headline print of +40k, reaffirming the RBA's message that the labour market outlook remains upbeat,'' analysts at TD Securities said. ''Consistent with this, we pencil in a small uptick in the participation rate from 66.4% to 66.5%. Despite this uptick in the participation rate, we forecast the unemployment rate will fall to a record low of 3.9%.''