AUD/USD continues a downtrend, pressured by solid US data, weak Aussie report

• AUD/USD continues to tumble for the second day in the week, currently trading at 0.6606.
• US debt ceiling discussions, strong labor market data, and Fed speakers boost USD strength.
• Australia’s jobs report shows the economy lost 27,100 jobs, pushing the unemployment rate from 3.5% to 3.7% in April.

AUD/USD tumbles for the second day in the week after Wednesday’s pause formed a doji, but a break of an upslope support trendline, opened the door for further losses. Reasons like a positive sentiment due to debt ceiling negotiations, solid economic data from the United States (US ), and Fed speakers were the main drivers of the US Dollar (USD) appreciation against the Australian Dollar (AUD). At the time of writing, the AUD/USD Is trading at 0.6606.

AUD weakens on disappointing jobs report, while USD got bolstered by positive US economic data

Wall Street continues to print gains amidst an upbeat market sentiment. The US debt ceiling discussions would continue through the latest comments by US House Speaker Kevin McCarthy, who said it’s essential to have an agreement principle this week and emphasized that the US Congress must vote next week to meet the “default” deadline.

Aside from these comments, a strong labor market report by the US Bureau of Labor Statistics (BLS) showed that unemployment claims continued to downtrend. Initial Jobless Claims for the last week ending on May 13 rose by 242K below estimates and the prior’s week figures of 254K, though it should be said that figures from the last’s week were “inflated” by fraud in a claims report in Massachusets.

Meantime, the Philadelphia Fed Manufacturing Index plunged to -10.4, less than the estimated fall of -19.8, and improved compared to April’s -31.3. The improvement is mainly attributed to a recovery in new orders, though the employment subcomponent deteriorated while a price gauge rose. Although hiring moderated, higher prices paid by producers would deter the Federal Reserve (Fed) from pausing its tightening cycle.

Therefore, the AUD/USD continued its downtrend and hit a daily low of 0.6604 as US data hit the screens. The US Dollar Index is soaring sharply more than 0.50%, up at 103.574, about to test the 2017 high of 103.820. A breach of the latter could weigh on the AUD/USD, which is about to dive below the 0.6600 figure, with the following support area found at the April 28 low of 0.6573.

The AUD/USD weakened during Thursday’s Asian session; the latest Australian jobs report showed the economy lost 27,100 jobs, and the unemployment rate rose from 3.5% to 3.7% in April. Even though it remains at historically low levels, the report could help the Reserve Bank of Australia (RBA) to hit its inflation target of 2%-3%. The market expects the RBA to hold rates unchanged at its June 7 meeting.

AUD/USD Price Analysis: Technical outlook

The AUD/USD pair remains downward biased and might accelerate its fall toward the April 18 low of 0.6573, followed by a test of the year-to-date (YTD) low of 0.6564. The Relative Strength Index (RSI) indicator is in bearish territory, suggesting selling pressure remains in charge, while the 3-day Rate of Change (RoC) shifted to negative readings, supporting a continuation of the downtrend.