AUD/USD drops to fresh daily low, holds above 0.6700 mark ahead of US NFP

• AUD/USD turns lower for the second straight day amid strong follow-through USD buying.
• Thursday’s upbeat US macro data fuels hawkish Fed expectations and underpins the buck.
• Looming recession risks further benefit the safe-haven USD ahead of the crucial US NFP.

The AUD/USD pair attracts fresh selling following an early uptick to the 0.6800 neighbourhood and turns lower for the second successive day on Friday. The steady intraday descent drags spot prices to a fresh daily low, around the 0.6725-0.6720 region heading into the North American session and is sponsored by a strong follow-through US Dollar buying.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, trades near a one-month high and continues to draw support from Thursday's upbeat US macro data. The US ADP report on private-sector employment and an unexpected fall in Weekly Initial Jobless Claims pointed to a strong labour market, which could allow the Fed to stick to its aggressive rate hike path.

Apart from this, the prevalent cautious market mood further seems to benefit the safe-haven greenback and contributes to driving flows away from the risk-sensitive Australian Dollar. Despite the latest optimism over the easing of strict COVID-19 restrictions in China, concerns about a deeper global economic downturn weigh on the sentiment and tempers investors' appetite for riskier assets.

It, however, remains to be seen if the USD bulls can maintain their dominant position as the focus shifts to the closely-watched US monthly jobs data. The popularly known NFP report could influence the Fed's near-term policy outlook and play a key role in driving the USD demand. This, in turn, should assist investors to determine the next leg of a directional move for the AUD/USD pair.

Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out in the near term and positioning for any further depreciating move. Nevertheless, the AUD/USD pair remains on track to register losses for the first time in the previous three weeks.

Technical levels to watch