AUD / USD drops; US dollar volatility to rise as NFPs loom

THE STRENGTH OF THE US DOLLAR DRIVES AUD / USD; NFP EYE REPORT

Currency markets saw increased activity during Thursday’s trading session, driven by a large surge of strength in the US dollar. The broader DXY index climbed 0.65% to its highest level since May 14 as the US dollar felt buying pressure in all markets. major currency pairs. The strength of the US dollar was noticeable against the Aussie especially with the AUD / USD dipping 93 pips on the day.

AUD / USD price action is now trading well below the 0.7700 handle, which appears to provide confirmation of the bearish head and shoulders we reported two weeks ago. This could suggest that the AUD / USD is poised to weaken further, although it will likely be important to keep an eye out for fundamental drivers catalyzing the move.

The Australian dollar recently faced new headwinds amid Accommodating RBA rhetoric as the US dollar saw waves of demand due to the Fed’s rise risk of dropping out.Not to mention, Sentiment of IG customers AUD / USD trader positioning data also hints at the potential for further decline as well.

USD PRICE OUTLOOK – IMPLIED VOLATILITY TRADING RANGES IN US DOLLAR (OVERNIGHT)

Nonetheless, the outlook for the AUD / USD and the wider US dollar is likely to depend on the upcoming release of the non-farm payrolls and how the monthly employment reports influence the debate on the Fed cone. NFPs are expected to cross the threads of the market on Friday 04 June at 12:30 GMT. As such, the American dollar overnight implied volatility the readings have improved a bit.

Particularly better than expected NFP data would likely reflect the widespread strength of the US dollar. On the flip side, if the NFPs miss the consensus forecast, the US dollar could pull back as bears look to fade recently. Ultimately, I’ll keep an eye on the direction of Treasury yields as an indicator that correlates positively with the next direction in USD price action.

Keep reading – US Dollar Forecasts: Inflation, Fed Cut Debate, Yields Key

— Written by Rich Dvorak, analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for a real-time market snapshot

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