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Australian Dollar remains on the front foot vs weaker USD after China Services PMI

  • AUD/USD attracts buyers for the second straight day as receding Fed hike bets undermine the USD.
  • Spot prices move little following the release of rather unimpressive China’s RatingDog Services PMI.
  • Geopolitical risks hold back the USD bears from placing aggressive bets, capping gains for the major.

The AUD/USD pair turns positive for the second straight day following a modest Asian session downtick to the 0.6910 region amid the emergence of fresh US Dollar (USD) selling. Spot prices stick to gains following the release of the RatingDog China Services PMI and currently trade around the 0.6930 area, just below a one-and-a-half-week top set on Wednesday.

The gauge eased from a three month high of 54.4 to 54.1 in June. The reading, however, pointed to a continuous expansion in China’s services sector and offers some support to the China-proxy Australian Dollar (AUD). The USD, on the other hand, languishes near a two-week low, touched on Thursday, amid receding US Federal Reserve (Fed) rate hike bets. This turns out to be another factor that contributes to the bid tone surrounding the AUD/USD pair.

The closely-watched US Nonfarm Payrolls (NFP), released on Wednesday, showed that the economy added 57K jobs in June, far below the 110K expected. Moreover, the previous month’s reading was revised down from 172K to 129K, pointing to softening labor conditions and offsetting a downtick in the Unemployment Rate to 4.2% in June. Nevertheless, the data shifted market expectations from one to two Fed rate increases in 2026 to between zero and one hike.

However, persistent geopolitical uncertainties hold back the USD bears from placing aggressive bets and cap the upside for the AUD/USD pair. In fact, the New York Times reported that US officials feared Israel may be hatching a plan to kill Iran’s senior negotiators, which could derail negotiations and trigger renewed fighting. Furthermore, Iran’s military headquarters warned that any US interference in the Strait of Hormuz will be met with a “decisive and swift response.”

Adding to this, relatively thin liquidity on the back of a holiday in the US makes it prudent to wait for strong follow-through buying before positioning for an extension of the AUD/USD pair’s recovery from a three-month low, set earlier this week. Nevertheless, spot prices seem poised to register modest gains for the first time in three weeks and remain at the mercy of USD price dynamics.

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New Zealand Dollar remains firm above 0.5700 after Chinese services PMI data

  • NZD/USD strengthens to near 0.5705 in Friday’s Asian session. 
  • China’s RatingDog Services PMI eased to 54.1 in June, vs 54.4 
  • US NFP increased 57,000 in June, well below expectations of a 110,000 rise. 

The NZD/USD pair gathers strength to around 0.5705 during the Asian trading hours on Friday. The New Zealand (NZD) remains strong following the Chinese economic data. The US markets will be closed on Friday in observance of Independence Day. 

Data released by RatingDog on Friday showed that China’s Services Purchasing Managers’ Index (PMI) eased slightly to 54.1 in June from 54.4 in May. However, this figure still marked the third-steepest increase in services activity in nearly three years. Services exports grew for a second consecutive month, expanding at the fastest rate since October 2024. The China-proxy Kiwi edges higher following China’s PMI report.

On the central bank’s front, ASB Bank dropped its call for a July hike from the Reserve Bank of New Zealand (RBNZ) and expects the RBNZ to keep the Official Cash Rate (OCR) on hold at the upcoming July meeting, followed by steady 25-basis-point increases starting in September, with the OCR peaking at 3.25% by early 2027.

Signs of a cooling US labor market have prompted financial markets to dial back expectations for a near-term interest rate hike from the US Federal Reserve (Fed), weighing on the Greenback against the NZD. Nonfarm Payrolls (NFP) rose by 57,000 jobs in June, the Labor Department’s Bureau of Labor Statistics reported on Thursday. Economists had forecast payrolls advancing 110,000. 

Meanwhile, the Unemployment Rate fell to 4.2% during the same period, down from 4.3% in May. Financial markets are now pricing in nearly a 52% odds of a US rate hike by September, down from 66% before the jobs data, according to the CME FedWatch tool.

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EUR/USD Price – Trades cautiously higher near mid-1.1400s amid mixed setup

  • EUR/USD gains positive traction for the second straight day amid a modest USD weakness.
  • Receding bets for an interest rate hike by the Fed weigh on the USD and support the pair.
  • The technical setup warrants some caution for bulls before positioning for additional gains.

The EUR/USD pair attracts some dip-buyers during the Asian session on Friday, stalling the previous day’s modest pullback from the 1.1470-1.1475 region, or a nearly two-week high. Spot prices currently trade just below mid-1.1400s and seem poised to register gains for the first time in three weeks as receding US Federal Reserve (Fed) rate hike bets keep the US Dollar (USD) depressed.

From a technical perspective, the EUR/USD pair struggled to find acceptance above the 23.6% Fibonacci retracement level of the April-June downfall and faced rejection near the ascending channel resistance on Thursday. Against the backdrop of the recent decline, the said upward-sloping channel constitutes the formation of a bearish flag pattern. This keeps a capped tone beneath the 200-period Exponential Moving Average (EMA) on the 4-hour chart, which reinforces the overhead supply zone.

Meanwhile, momentum indicators point to a mildly constructive backdrop. In fact, the Relative Strength Index (RSI) is hovering just below 60, while the Moving Average Convergence Divergence (MACD) histogram is slightly positive. Nevertheless, it will still be prudent to wait for a sustained strength above the 23.6% Fibo. level before placing fresh bullish bets on the EUR/USD pair and positioning for an extension of the recent recovery from the 1.1325 region, or the lowest level since May 2025.

The next relevant hurdle is pegged near the channel top at 1.1466. Above that, the 200-period EMA at 1.1516 and the 38.2% retracement at 1.1525 form a broader barrier ahead of deeper Fibonacci caps at 1.1587 and 1.1649. On the downside, the first notable support emerges at the lower boundary of the ascending channel around 1.1371, with the previous channel starting area near 1.1325 acting as a secondary floor if bearish pressure extends.

(The technical analysis of this story was written with the help of an AI tool.)

EUR/USD 4-hour chart

Chart Analysis EUR/USD

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.47%-1.16%-0.35%-0.18%-0.68%-1.08%-0.91%
EUR0.47%-0.75%0.13%0.26%-0.23%-0.67%-0.50%
GBP1.16%0.75%0.90%1.01%0.51%0.07%0.25%
JPY0.35%-0.13%-0.90%0.16%-0.34%-0.64%-0.59%
CAD0.18%-0.26%-1.01%-0.16%-0.50%-0.80%-0.67%
AUD0.68%0.23%-0.51%0.34%0.50%-0.43%-0.26%
NZD1.08%0.67%-0.07%0.64%0.80%0.43%0.15%
CHF0.91%0.50%-0.25%0.59%0.67%0.26%-0.15%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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GBP/USD Price – Gathers strength above 1.3350, but stays capped below 100-day average

  • GBP/USD gains ground to near 1.3360 in Friday’s early European session.
  • The major pair remains capped below the key 100-day MA.
  • The first upside barrier emerges at 1.3410; the initial support level is seen at 1.3300.

The GBP/USD pair trades in positive territory around 1.3360 during the early European session on Friday. The British Pound (GBP) gathers strength against the US Dollar (USD) on a weaker-than-expected US Nonfarm Payrolls (NFP) report.

Signs of a cooling US labor market have prompted financial markets to dial back expectations for a near-term interest rate hike from the US Federal Reserve (Fed), weighing on the Greenback and creating a tailwind for the major pair. Financial markets are now pricing in nearly a 52% chance of a US rate hike by September, down from 66% before the jobs data, according to the CME FedWatch tool.

Traders will closely watch the developments surrounding UK politics since Keir Starmer stepped down last week. Natixis analysts said while Andy Burnham’s commitment to fiscal discipline offers near-term support, markets will closely monitor future budgets for any signs that fiscal rules are being relaxed to finance higher public spending.

Chart Analysis GBP/USD

Technical Analysis:

In the daily chart, GBP/USD sits above the Bollinger middle band, keeping a modestly supported tone, while it remains capped by the 100-day simple moving average (SMA). The Relative Strength Index (RSI) at about 54 suggests mildly positive but not overextended momentum.

On the topside, initial resistance is located at the 100-day SMA near 1.3410, and a daily close above this barrier would open the door toward the upper Bollinger band around 1.3468. On the downside, immediate support aligns with the Bollinger middle band at 1.3300, ahead of the lower band near 1.3132, where a deeper pullback could attract dip-buying interest within the broader range.

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Dollar Holds Decline on Soft Jobs Report

The dollar index held below 101 on Friday after tumbling in the previous session, as weaker-than-expected US labor market data led traders to dial back expectations for Federal Reserve rate hikes this year. The US economy added just 57,000 jobs in June, the fewest in four months and well below forecasts of 110,000, while the unemployment rate stood at 4.2%. That followed a report on Wednesday showing private-sector job growth also fell short of expectations. Fed funds futures now imply roughly a 50% chance of a September rate hike, down from 67% before the latest employment report. Fed Chair Kevin Warsh also said this week that inflation expectations are moderating while reaffirming the central bank’s commitment to maintaining price stability. The dollar index is on track to end the week lower, snapping a two-week winning streak.

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Rupee Pauses Losses on Softer Dollar

The Indian rupee hovered around 95.2 per dollar, pausing recent losses as the greenback softened on softer-than-expected labor data. June payroll growth slowed sharply while gains for the previous two months were revised lower, prompting traders to reduce the probability of a September Federal Reserve rate hike to around 53%, down from 75% before the report. The weaker dollar lifted most Asian currencies, providing support for the rupee. Despite the improved sentiment, investors continue to monitor merchant and portfolio flows after the rupee fell to a three-week low in the previous session, pressured by arbitrage-related demand and importer dollar purchases. Earlier this week, the currency was supported by interventions from the RBI in both the onshore spot and offshore non-deliverable forwards markets. However, those efforts were largely offset by persistent dollar demand from foreign banks and oil companies, as well as continued foreign investor outflows from Indian equities.

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Trade of The Day – GBP/USD

Facts: The price bounced off the upper limit of 1:1 structure GBPUSD sits below the 200-period moving average from H4 interval Recommendation: Trade: Short position on GBPUSD at market price Target: 1.3160, 1.3083 Stop: 1.3404

Opinion: Looking at GBPUSD chart at the H4 interval, one can see that the price bounced off the key resistance today. The area near 1.3340 is marked with the upper limit of 1:1 structure, and 200-period moving average from the H4 interval. According to the Overbalance strategy, as long as the price sits below the aforementioned area, the main trend remains downward. We recommend going short GBPUSD at market price with two targets: 1.3160 and 1.3083. We also recommend placing a stop loss order at 1.3404. Source: xStation5

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Currency Hedger – NFP Preview

NFP preview:

Will there be a World Cup boost? The June payrolls report is released today at 1330 BST, a day early this month due to the Independence day holiday on Friday. The market is expecting an approximately 113k increase in payrolls, which is a step down from the 172k print for May, the unemployment rate is expected to remain stable at 4.3%, and average hourly earnings could pick up a notch to 3.5% from 3.4% YoY. The strong reading for May makes the June report a test: can the upside momentum be maintained, or was the May figure an anomaly? Federal government jobs jumped last month, but this is expected to be one-off. If we get a reading that is close to consensus, then it would suggest modest growth in US jobs numbers are continuing. This would point to a resilient labour market that is not falling off a cliff.

Resilient labour market

Average monthly jobs growth this year has been above 80k, and we do not expect a number lower than this. The Atlanta Fed’s GDPNow model is predicting robust GDP growth for Q2 of 2.5%, which should easily support US job growth of 100k plus. We expect the bulk of jobs to have been created in the education and healthcare sector, with decent gains for construction and leisure and hospitality. The question is, could there be a World Cup boost? Stadium attendance at games so far in the US has hit a record high, of more than 3.5mn, which could boost hotels and the leisure sector.

Will payrolls boost Fed rate hike chances?

This payrolls report comes a day after the new Federal Reserve Chair, Kevin Warsh, spoke at the ECB’s central bankers conference in Portugal. Kevin Warsh said a few things that are worth noting. Firstly, that inflation expectations are moderating, secondly, that AI’s impact on the jobs market is not yet visible and thirdly, that his task forces could change what economic data the Fed focuses on. The latter point is worth noting. Although we think that payrolls will remain important for central bank decision making, change is coming at the Fed. As we lead up to this payrolls report, the market continues to price in a 28% chance of a rate hike at the Fed’s next meeting on 29th July.

Interest rate futures markets have repriced rates higher after a surprisingly hawkish FOMC meeting, and if we get a significant upside surprise for payrolls today, of 180k plus, then we could see the chance of a July rate hike surge past 50%. So far, the lead indicators have been mixed. Although the ISM manufacturing employment index was stronger, it remained below 50. Added to this, the ADP private sector payrolls report was slightly weaker than expected and was 113k for last month. The 4-week moving average for initial jobless claims ticked higher last week, but at 224k, it is still low.

The impact of a downside surprise

A downside surprise of 70k or lower could see the US Treasury curve steepen, as 2-year Treasury yields fall, and long-end bond yields rise. We think a weaker number could also lead to a recalibration of US interest rate expectations, and we think the Fed would be unlikely to hike rates in July if the labour market is showing signs of softening, especially if the unemployment rate also rises.

What’s next for the dollar

This data will also be the next major driver of the dollar, at least until we get the June CPI report. The US dollar index is at a 14-month high, and the US dollar is the best performing currency in the past year. In the past month, the USD index has risen by 2.5%. The break above 100.50 2 weeks ago was an extremely bullish development, and is supportive of further gains. However, the forex market can be contrarian around payrolls reports, so we could see some buying the rumour, before selling the fact later on Thursday. The technicals continue to point in a bullish direction, so the path of least resistance is for further gains for the Greenback. If payrolls are weak, and the dollar does experience a sell off, as long as the dollar index does not fall below 100.50, then the uptrend remains intact.

Chart 1: The dollar index

Source: XTB