AUD/USD retreats towards 0.6950 ahead of RBA Monetary Policy Statement, US NFP

• AUD/USD bulls take a breather after two-day uptrend, eases of late.
• US dollar dropped despite recession fears, mixed data and geopolitical woes.
• Yields remained pressured for the second consecutive day.
• RBA MPS, US NFP will be important, risk catalysts should also be watched carefully for clear directions.

AUD/USD bulls take a breather after a two-day uptrend, recently easing to 0.6965 as the key NFP Friday begins. The pair’s latest moves could be linked to the cautious sentiment ahead of the key Monetary Policy Statement (MPS) from the Reserve Bank of Australia (RBA), as well as the US employment report for July. However, the buyers remain hopeful over the broad US dollar weakness.

That the RBA matched the market’s expectations of announcing 50 basis points (bps) rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. However, the RBA Statement that says, “The central bank is not on the pre-set path in normalizing rates,” appeared to have lured the AUD/USD bears after the monetary policy decision, which in turn highlight today’s RBA MPS.

On the other hand, the US Initial Jobless Claims rose to 260K for the week ended on July 30 versus 254K prior and 259K expected. Further, job cuts eased and German Factory Orders improved while the US Goods and Services Trade Balance improved to $-79.6B versus $-80.1B market consensus and $-84.9B revised prior. Given the mixed data, the market players placed bets on the Fed’s aggression but that couldn’t lift the US dollar amid fears of recession.

On Thursday, the Bank of England (BOE) formally accepted the fears of recession and further hardships while Cleveland Fed President Lorretta Mester said that recession risks have increased in the US.

Amid these plays, Wall Street closed mixed and the yields were down, which in turn pressured the US dollar ahead of the key data.

Technical analysis

AUD/USD pair’s successful rebound from a four-month-old previous support line, around 0.6875 by the press time, directs the quote towards a downward sloping resistance line from April 20 and 100-day EMA, close to 0.7025 and 0.7040 in that order.