AUD/USD Tests 0.6930 After US Nonfarm Payrolls Plunge
The Australian dollar strengthened against the US dollar on Thursday (July 2nd) after weaker-than-expected US jobs data came out. AUD/USD rose to near 0.6930, supported by a weaker greenback and lower expectations for a Federal Reserve interest rate hike.
The Nonfarm Payrolls report showed the US economy added only 57,000 jobs in June, well below market expectations of around 110,000. May's data was also revised down to 129,000 from 172,000, reinforcing signs that hiring momentum is cooling.
Although the unemployment rate fell from 4.3% to 4.2%, the decline does not fully reflect a stronger labor market. This is because the labor force participation rate fell to 61.5%, its lowest level since March 2021. This means that some of the decline in unemployment occurred because more people left the labor force.
Wage data remained relatively stable. Average Hourly Earnings rose 0.3% month-on-month in June, while annual growth was 3.5%. Average hours worked were also unchanged at 34.3 hours. This indicates that labor demand is slowing, but has not yet entered a phase of sharp weakness.
Jobless claims data also showed that the US labor market remains quite resilient. Initial Jobless Claims fell to 215,000 for the week ending June 27, lower than expected. Meanwhile, Continuing Claims rose slightly to 1.814 million, indicating that layoffs remain under control even though companies are starting to be more cautious in hiring.
The softer payrolls release put downward pressure on US Treasury yields and weakened the dollar. The US dollar index fell near 100.70, giving riskier currencies like the Australian dollar room to strengthen. Typically, lower US yields are positive for the AUD/USD because they reduce the attractiveness of dollar-based assets.
However, the Aussie's gains were restrained by less-than-solid Australian domestic data. Weaker Australian trade figures have limited market optimism regarding export prospects, especially as investors continue to monitor commodity demand from China, Australia's main trading partner.
Fundamentally, the AUD/USD pair is currently receiving support from two perspectives. First, pressure on the US dollar has increased following weak employment data. Second, the likelihood of the Fed raising interest rates in the near future has also decreased. However, the Aussie's gains are not yet fully solidified, as Australian trade data and commodity sentiment remain risks.
Going forward, market focus will be on further comments from Fed officials, the direction of Treasury yields, and subsequent Australian economic data. If the US dollar continues to weaken and global data supports risk sentiment, the AUD/USD pair has the potential to test the 0.6950 to 0.7000 area.
Conversely, if the Fed signals another hawkish stance or Australian data weakens further, the Aussie's gains could be restrained. The 0.6900 area serves as important psychological support that must be maintained to maintain the AUD/USD's rebound momentum. (arl)
Source: Newsmaker.id
