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• The AUD/USD pair failed to gain traction on rising US recession fears and poor Australian employment data.
• US Initial Jobless Claims were better than expected, cushioning the US dollar fall.
• The RBA’s odds for a rate hike lie around 60%, while 40% expects no change to its monetary policy.

The AUD/USD currency pair slid for the second consecutive day, registering a new weekly low of 0.6871 due to a risk-off impulse spurred by recession worries mounting after US economic data showed the economy is slowing. Hawkish Fed commentary spooked investors, who flew to safety. At the time of writing, the AUD/USD has recently been seen trading at around 0.6901, which is below its opening price by 0.61%.

Growing Concerns in The US, a Headwind for The AUD/USD Pair

The AUD/USD pair appears set to continue to weaken, even though the US dollar remains offered across the board. Wednesday’s inflation data in the United States cooled down, reflecting the tightening monetary conditions imposed by the US Federal Reserve. However, consumers are feeling the effects, as Retail Sales plunged on a monthly basis, while Industrial Production (IP) fell for the second straight month.

Thursday’s US economic docket witnessed unemployment claims rising by 190,000, which was 24,000 below expectations, while the Continuing Claims edged lower. At the same time, Housing Starts and Building Permits missed estimates, while the Philadelphia Fed Manufacturing Index, although in contractionary territory at -8.9, improved compared to November’s -13.7 reading.

The US Dollar Index, a measure of the buck against a basket of peers, extended its losses for two straight days, sliding 0.24% to around 102.165. Nevertheless, a late recovery in US Treasury yields, namely the 10-year bond rate, climbed four bps at 3.411%, which is a headwind for the AUD/USD pair.

On the Australian side, employment figures unexpectedly fell in December, a headwind for the Aussie. Money market futures imply a 60% probability for the Reserve Bank of Australia (RBA) to lift rates in February, but there’s also a 40% chance the RBA will pause, given rates have risen by 300 bps.

What to Watch?

An absent Australian economic docket will leave AUD/USD traders leaning on US dollar dynamics. The US calendar will feature Existing Home Sales alongside Fed speak.

AUD/USD Key Technical Levels

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