Australian Dollar Licks Its Wounds Around 0.6900 Awaiting US Nonfarm Payrolls Data

• AUD/USD is looking for direction around 0.6900 after a nearly 4% decline in June.

• The unexpected Australian trade deficit in May has weighed on a potential Aussie recovery on Thursday.

• Markets are forecasting another solid US jobs report to confirm expectations of a Fed rate hike in September.

The Australian Dollar (AUD) remains practically flat against the US Dollar (USD) on Thursday, consolidating losses after having depreciated nearly 4% in June. The AUD/USD pair is trading within a broadly 65-pip range, with downside attempts contained at 0.6865 and bulls limited below 0.6930 so far.

Australian data released on Thursday failed to support the pair, as the Trade Balance posted an unexpected deficit in May, with an AUD 3,018 million shortfall. The market had forecast an AUD 2,200 million surplus, a moderate increase from the AUD 1,791 million positive balance seen in April.

A 6.9% decline in exports has reversed April’s 7.2% increase, which is the main reason to explain May’s negative surprise. Imports rose 2.6% from a 0.2% increase in the previous month, adding to May’s shortfall.

Strong US data and the AI fever are propelling the USD

The US Dollar, on the other hand, consolidates gains as recent data bolsters the narrative of US economic exceptionalism, while the AI fever continues to funnel foreign investment into the country, providing additional support to the Greenback.

 The Fed Chairman, Kevin Warsh, observed easing price risks in his speech in the European Central Bank’s forum in Sintra, Portugal, on Wednesday but maintained its commitment to fight inflation. Warsh shrugged off political pressures and vowed to bring consumer prices to the 2% target, underpinning hopes of a September rate hike.

On Thursday, all eyes are on June’s Nonfarm Payrolls (NFP) report to confirm those views. The US economy is expected to have created 110K new jobs last month, following three months of figures exceeding expectations that have eased concerns about last year’s labour market. Any reading above 100K would cement expectations of Fed tightening in the near-term, and is likely to provide additional support to the Greenback.