AUD/USD fails to stay above 0.74 as DXY starts recovering NFP-led losses

• PBoC’s announcement lifts the AUD against its rivals on Friday.
• The negative impact of NFP data on the greenback fades away.
• The US Dollar Index turns positive above 95.20.

The AUD/USD pair jumped to a fresh daily high at 0.74707 after the PBoC announced that it raised reserve requirements on FX forwards trading to 20%. Although it looked like the pair was ready to push higher on a weakening USD in the early NA session, it lost its momentum and was last seen trading at 0.7380, where it was still up 0.3% on a daily basis.

The highly anticipated data from the U.S. on Friday showed that the nonfarm payrolls increased 157K in July to miss the market expectation of 190K. However, the negative impact of this number on the greenback dissipated quickly as the underlying details of the employment report confirmed that the labor market was in great shape.  

June’s 213K reading got revised up to 243K and the unemployment rate fell to 3.9% from 4%. Moreover, wage inflation on a monthly basis rose 0.3% in July following June’s weak 0.1% growth and allowed the annual rate to stay unchanged at 2.7% to match the analysts’ estimates. After testing the 95 handle, the US Dollar Index gained traction and was last seen up 0.08% on the day at 94.25.  

Meanwhile, in a recently published statement, the PBoC said that raising reserve requirements was a transparent, non-discriminatory, price-based counter-cyclical macro-prudential policy tool.

Technical outlook

On the upside, the pair could encounter the first resistance at 0.7410 (20-DMA/daily high) ahead of 0.7460 (Jul. 25 high) and 0.7500 (psychological level). On the downside, supports could be seen at  0.7350 (daily low) ahead of 0.7315/10 (Jul. 29/Jul. 2 low) and 0.7240 (Dec. 19, 2016 low).