AUD/USD bears remain in control near YTD low, eyeing mid-0.7000s ahead of NFP

• AUD/USD witnessed some selling for the fourth successive day and retested YTD low on Friday.
• Disappointing Chinese PMI, concerns about US-China tensions exerted pressure on the aussie.
• A positive risk tone could help limit losses amid a subdued USD demand and ahead of the NFP.

The AUD/USD pair remained depressed heading into the European session and was last seen flirting with the YTD low, around the 0.7065 region.

The pair witnessed some selling for the fourth successive day and dropped to retest the lowest level since November 2020 during the early part of the trading action on Friday. A slight disappointment from the Caixin Chinese Services PMI, along with renewing concern about US-China tensions turned out to be a key factor that exerted pressure on the China-proxy Australian dollar.

A private survey showed that activity in China's services sector expanded at a slower pace in November amid rising inflationary pressures and continuing small-scale COVID-19 outbreaks. Adding to this, news that China's ride-hailing giant Didi has begun preparations to withdraw from US stock exchanges gave some jitters over the uncertainty as to how this will impact the broader US-China relations.

However, a generally positive risk tone could help limit any deeper losses for the AUD/USD pair, at least for the time being, amid a subdued US dollar price action. The market sentiment stabilized a bit on the back of easing fears about the potential economic fallout from the new and possible vaccine-resistant Omicron variant of the coronavirus first detected in South Africa.

Adding to this, the passage of a bill to fund the US government through mid-February further boosted investors' confidence. That said, growing market acceptance that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation might continue to act as a tailwind for the USD. This, in turn, warrants some caution before confirming that the AUD/USD pair has bottomed out.

Investors might also prefer to move on the sidelines and wait for a fresh catalyst from Friday's release of the closely-watched US monthly jobs data. The popularly known NFP report will play a key role in influencing the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities.

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