AUD/USD sees upside above 0.6880 despite soaring hawkish Fed bets

• AUD/USD aims to establish above 0.6880 as the DXY may deliver a sluggish performance.
• The US NFP remained stronger however the Average Hourly Earnings have ruined the market sentiment.
• Aussie jobless rate may skid to 3.8% from the prior release of 3.9%.

The AUD/USD pair is attempting to cross the critical resistance of 0.6850 at the open as Friday’s exhaustion in the US dollar index (DXY) is expected to turn into a sluggish performance. The asset is aiming to for more gains and more upside will be warranted on overstepping the major hurdle of 0.6880.

The greenback bulls are expected to underperform despite the upbeat US Nonfarm Payrolls (NFP) data.  The US economy added 372k jobs in June, significantly higher than the estimates of 268k but a little lower than the prior release of 384k. The Unemployment Rate remained in line with estimates and the prior print at 3.6%. No doubt, the outperformance of the US economy on the labor market front will empower the Federal Reserve (Fed) to announce extreme rate hikes with much less hesitation.

However, the catalyst which will hurt the US economy is the lower Average Hourly Earnings (AHE) recorded on Friday. On an annual basis, the economic data landed at 5.1%, higher than the estimates of 5% but lower than the former release of 5.3%. When the inflation rate is operating at a runaway pace, lower AHE is not lucrative for US households. Lower AHEs will hurt their paychecks vigorously in times of soaring price pressures. This may result in lower aggregate demand.

On the aussie front, investors are focusing on the employment data which will release on Thursday.  The Employment Change is seen severely lower at 25k than the prior release of 60.6K. However, the Unemployment Rate will slip to 3.8% vs. 3.9% reported previously.