AUD/USD keeps it around three-week low to 0.6850 ahead of Aussie Retail Sales

• AUD/USD fails to ignore broad USD strength, the latest downbeat Australian data.
• US-China trade optimism prevails with the phase-two deal likely after the US election, US-Iran war risk keeps soft despite allegations on Iran.
• Aussie retail sales can offer immediate direction ahead of the US employment data.

AUD/USD seesaws near the lowest since December 19 while trading around 0.6850 during the initial Asian session on Friday. The Aussie pair have been on the back foot since Tuesday as the US dollar registers broad strength amid receding risk of the US-Iran war as well as upbeat data. Markets are now gearing for November month Aussie Retail Sales as the immediate catalyst ahead of the key US jobs report for December. It's worth mentioning that Australia's AiG Performance of Services Index slipped below 50 mark to 48.7, from 53.7 prior, during December for the first time in five months. The same also adds to the Aussie weakness.

The US dollar manages to shrug off the mixed tone of the US Federal Reserve policymakers amid the broad risk-on as odds of the US-Iran were keep declining. As per the latest developments, global leaders are now alleging Iran behind the Ukrainian flight crash that had Canadian and British citizens.

The US President Donald Trump said sanctions on Iran have already been done and the US Treasury will soon announce them. The Republican leader also mentioned that he will better wait for the general elections to conclude before finalizing on the phase-two of the trade deal with China, despite starting the talks right away.

Given the lack of mixed direction, the US 10-year treasury yields close the day on the negative side, a loss of nearly two basis points, to 1.855%. On the contrary, Wall Street cheered many catalysts that support abating risk and sustained easy money policy.

Traders are now looking forward to Australia’s November month seasonally adjusted Retail Sales figures as an immediate catalyst. Market consensus favour an increase to 0.4% from 0.0% prior. Following that, global traders could accept the pre-NFP silence in the wait for the key US data. For which Westpac says, “There is plenty of room for a surprise as ever in the US employment report. Non-farm payrolls surged 266k in Nov, the strongest reading since Jan 2019, while the unemployment rate slipped back to 3.5%. The median forecast for NFP is 160k, with the +/- 1 standard deviation range 146k to 185k (Bloomberg survey). The unemployment rate is expected to hold at 3.5%, while average hourly earnings are seen up 0.3%mth, 3.1%yr. The post-GFC peak in wages growth was 3.4%yr in Feb 2019.”

Technical Analysis

While December 17/18 low near 0.6840/35 can offer immediate support, prices remain under pressure unless clearing a 200-day SMA level of 0.6892.