AUD/USD rallies to fresh sessison high as the greenback bleeds-out to test critical support

• AUD/USD is currently trading at 0.7194 and around the highs of the day so far.
• The US dollar bleeds out in the final hours of the New York session as traders start to focus on the Jackson Hole.

AUD/USD has moved in a range between 0.7150 and 0.7196, up 0.47% at the time of writing while the DXY trades 1 pip above the 93 figure. 

Meanwhile, less optimism has been reflected through the Aussie of late as markets have started to doubt the reflation story after a set of grim domestic surveys. 

Overnight, the latest survey showed that payroll jobs declined 0.8% over the fortnight ending 8 August and jobs are now down 4.9% since the w/e 14 March.

This is the weakest they’ve been since early June. Total payroll wages are down 6.2% since mid-March, deteriorating from −1.7% in early July.

The Australian Bureau of Statistics noted that “some of the initial impacts” from the Stage 4 restrictions in Melbourne and Stage 3 in regional Victoria were captured, but it’s likely the impact will be larger and clearer in coming weeks.

However, it is not just Victoria where weakness is showing up.

Analysts at ANZ Bank explained that the jobs recovery elsewhere in the country also appears to be stalling, particularly in New South Wales and the ACT.

We are expecting outright falls in employment in August-September.

If there is continued emphasis on the weakening climate in the economy, the fact that AUD has been regarded as the most overvalued currency among the G10 pro-cyclicals, AUD will be vulnerable if markets start pricing out some market recovery.

Still, with the greenback under scrutiny, USD bearish sentiment will potentially lend a lifeline to the AUD/USD bulls.

The Jackson Hole this week is critical

Given the persistent inflation undershoot, the Federal Reserve is expected to indicate that rates could be lower for longer during a symposium themed and entitled as “Navigating the Decade Ahead: Implications for monetary policy”. 

Fed Chairman Powell’s keynote address will be the focus where he is expected to offer more insights on the Fed’s review of monetary policy and the anticipated average inflation targeting.

That could help to underpin the downside case for the greenback and simultaneously prop up the US stock markets (AUD correlated) until the FOMC that next meets on 15/16th September.

AUD/USD levels