AUD/USD displays a volatility squeeze below 0.6800, focus is on US NFP

• AUD/USD is facing volatility contraction as the DXY has turned sideways.
• The aussie bulls have failed to capitalize on the 50 bps rate hike announcement by the RBA.
• This week, the US employment data will be the major trigger for the FX domain.

The AUD/USD pair is juggling minutely above 0.6780 in the early Tokyo session. It looks like the pair is following the footprints of the lackluster US dollar index (DXY) and is witnessing volatility contraction. There is severe pessimism in the FX domain and risk-perceived currencies are falling like a house of cards. However, the aussie bulls have defended their weekly lows of 0.6764 for the second time on Wednesday.

The antipodean has failed to capitalize on the elevation of the interest rate by the Reserve Bank of Australia (RBA). On Tuesday, RBA Governor Philip Lowe hiked its Official Cash Rate (OCR) by 50 basis points (bps). Now, the RBA’s OCR stands at 1.35% after a consecutive half-a-percent rate hike. The RBA is very much focused to bring price stability to its economy as the inflation rate has reached 5.1%, recorded in the first quarter of CY2022.

Meanwhile, the US dollar index (DXY) is displaying back and forth moves above 107.00. The DXY has renewed its 19-year high at 107.26 after the release of the hawkish minutes. Only one Federal Open Market Committee (FOMC) member voted against the rate hike announcement by 75 bps.

Now, investors are shifting their focus entirely to the US employment data, which is due on Friday. As per the market consensus, the US economy added 270k jobs in June, higher than the former release of 390k. However, the Unemployment Rate may remain stable at 3.6%.