AUD/USD grinds at two-month low around 0.6550 as RBA Monetary Policy Statement, US NFP loom

• AUD/USD struggles to defend corrective bounce off two-month low.
• Mixed US data prod US Dollar bulls ahead of NFP but firmer yields keep Greenback bulls hopeful.
• Unimpressive statistics from Australia, China join market’s cautious mood to test Aussie buyers.
• RBA Monetary Policy Statement needs to defy dovish hopes after two consecutive inactions to defend AUD/USD.

AUD/USD portrays the typical inaction ahead of the key data/events as it makes rounds to 0.6550 amid early Friday morning in Canberra. In doing so, the Aussie pair signals the trader’s anxiety ahead of the Reserve Bank of Australia’s (RBA) Monetary Policy Statement (MPS) and the US Nonfarm Payrolls (NFP). It’s worth noting that the quote bounced off a two-month low the previous day amid the US Dollar’s retreat from a multi-day high but struggles to defend the buyers of late.

On Thursday, mixed US data joined the pre-NFP consolidation to check the US Dollar bulls after the Greenback rose to the highest level since July 07. Even so, strong US Treasury bond yields and dovish bias surrounding the Reserve Bank of Australia (RBA), as well as mixed data from the Pacific nation, challenge the risk-barometer pair.

The Australian Bureau of Statistics (ABS) unveiled details of Australia’s preliminary readings of the second quarter (Q2) Retail Sales and foreign trade numbers for June. The details suggest a slight improvement in the Aussie Q2 Retail Sales, to -0.5% QoQ from -0.6% prior, as well as a deterioration in the Trade Balance that eased to 11,321M compared to 11,791M in previous readouts and 11,000M expected. Furthermore, the final readings of Australia’s S&P Global Composite PMI eased to 48.2 for July from 48.3 while the Services PMI slide to 47.9 from 48.0.

On a positive note, China’s Caixin Services PMI jumps to 54.1 in July from 53.9 prior and 52.5 market expectations.

Meanwhile, US ISM Services PMI dropped to 52.7 for July from 53.9 prior, versus 53.0 market forecasts. The details of the ISM Services Survey unveiled that Employment Index and New Order Index also came in softer but the Prices Paid jumped to a three-month high.

Further, the US Factory Orders improved to 2.3% MoM for June versus 0.4% prior (revised) and 2.2% market forecasts while Initial Jobless Claims matches 227K expected figures for the week ended on July 28 from 221K prior.

Additionally, the preliminary readings of the Nonfarm Productivity for the second quarter (Q2) rallied by 3.7% compared to 2.0% expected and -1.2% previous readings whereas Unit Labor Cost eased to 1.6% for the said period versus 2.6% consensus and 3.3% prior.

It should be noted that the US 10-year Treasury bond yields rose to a fresh high since November 2022 before ending the trading day near 4.18% whereas the Wall Street benchmark marked mild losses by the end of Thursday’s North American session. It’s worth noting that the US bond coupons are heading towards the worrisome levels that previously triggered economic hardships, which in turn prod AUD/USD bulls.

Moving on, the RBA MPS will be crucial to watch after the Aussie central bank kept the rates unchanged in the last two consecutive meetings. Traders will seek clues to confirm the policy pivot bias as many banks are now flagging the RBA’s policy pivot.

Further, the early signals for the employment report have been positive but the headline Nonfarm Payrolls (NFP) bears downbeat market forecasts, likely softening to 200K versus 209K prior. Further, the Unemployment Rate is likely to remain static at 3.6%.

Technical analysis

An upward-sloping support line from mid-October 2022, around 0.6540 by the press time, defends the AUD/USD pair buyers even if the corrective bounce appears elusive below late June’s low of near 0.6600.