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AUD/USD climbs above 0.70 as greenback weakens on disappointing PMI data

  • Nonfarm payrolls increased by 263K in April.
  • ISM’s Non-Manufacturing PMI fell in April to hurt the demand for the USD.
  • US Dollar Index erased Thursday’s gains after the mixed data.

After dipping below the 0.70 mark in the early NA session, the AUD/USD pair reversed its course and turned positive on the day. As of writing, the pair was up 0.26% on a daily basis at 0.7018  but was still losing around 30 pips for the week.

Earlier today, the U.S. Bureau of Labor Statistics reported that nonfarm payrolls in the U.S. increased by 263,000 in April to surpass the market expectation of 185,000. Moreover, the unemployment rate dropped to 3.6%, its lowest reading in nearly five decades. Although the greenback gathered strength with the initial reaction, the details of the publication and the next batch of data forced the currency to weaken against its rivals.

The labour market data revealed that wage inflation in April rose 0.2% and 3.2% on a monthly and yearly basis, respectively. Furthermore, the ISM in its latest report showed that the business activity in the service sector grew at a softer pace than expected with the headline PMI slumping to 55.5 from 56.1. Similarly, the IHS Markit’s Services PMI dropped to 53 in April from 55.3 in March.

The US Dollar Index, which advanced to its highest level of the week at 98.10, erased a large part of the gains it recorded in the second half of the week and was last down 0.33% on the day at 97.50.

Assessing the market reaction to the jobs data, “The slightly lower dollar after the excellent US payroll report does not mean that the report will not be a benefit to the greenback but only that in the immediate reaction the good news was already priced into the currency markets,” said FXStreet senior analyst Joseph Trevisani.

Technical levels to consider

 

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