AUD/USD steadies near seven-week low, US NFP eyed to conquer 0.7650

• AUD/USD licks its wounds after the heaviest drop since May 12.
• US dollar cheers the Fed’s tapering signals, upbeat data, Aussie stimulus ignored.
• Market sentiment remains sluggish amid the pre-NFP trading lull.
• Australian housing numbers, Fed’s Powell and US jobs report will be the key.

AUD/USD consolidates the heaviest drop in three weeks around 0.7660, up 0.10% intraday, amid the initial Asian session on Friday. The Aussie pair slumped to the lowest since April 14 the previous day amid a broad US dollar rally. However, a lack of catalysts afterward and the cautious sentiment ahead of the crucial US data favor the latest moves of the major currency pair.

King dollar shines of safe-haven demand…

Thursday’s strong employment and ISM Services data put a bid under the US dollar amid hopes of the Fed’s tapering. The market woes were also backed by the US Federal Reserve’s (Fed) trimming of a funding facility, namely portfolio sales, used throughout the pandemic to support the economy.

While the ADP jumped to 972K, well beyond the 650K forecast and 654K prior, Q1 Unit Labor Costs, Nonfarm Productivity and Weekly Jobless Claims pin-point a strong NFP for May, expected 664K versus 266K. Further, ISM Services PMI also jumped the most on record with 64.00 figures versus 63.00 expected and 62.7 previous readouts.

To justify the risk-off mood, the US dollar index (DXY), a gauge of the greenback versus six major currencies, rallied the most since mid-May, not to forget crossing a three-week-old resistance line, now support.

It’s worth noting that the Australian government’s fiscal relief for the Victorian citizens, to battle the snap lockdown, as well as recently easing covid figures from the second most populous state, couldn’t renew the AUD/USD strength. On the same line were chatters that US President Joe Biden is ready to step back on his tax hike demand from 25% to 18% ahead of the G7 Finance Ministers’ meeting in London.

Amid these plays, S&P 500 Futures print mild losses, tracking Wall Street losses, whereas the commodities also lick the USD-led wounds by the press time.

Moving on, Australia’s Home Loans and Investment Lending for Homes, for April, may offer intermediate moves, coupled with Chinese headlines, to AUD/USD traders. However, major attention will be given to the US NFP and Fed Chair Powell’s speech for clear direction.

Read: US May Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises

Technical analysis

With a clear downside break of 50-day SMA and a horizontal area around 0.7675, AUD/USD is vulnerable to test the 0.7535-30 support zone, comprising 200-day SMA and yearly bottom. Meanwhile, a corrective pullback beyond 0.7675 needs a 50-day SMA breakout, around 0.7720, to restore normalcy.