AUD/USD trades with modest gains below 0.7800, eyes on US NFP report

• AUD/USD is moving sideways below 0.7800 on Friday.
• US Dollar Index seems to have steadied below 90.00.
• Nonfarm Payrolls in US is expected to increase only 71K in December.

After snapping a two-day winning streak and closing in the red on Thursday, the AUD/USD pair is having a difficult time making a decisive move in either direction on Friday as markets remain subdued ahead of key US data. As of writing, AUD/USD was up 0.2% on the day at 0.7782.

DXY goes into consolidation below 90.00

Following a sharp decline during the first half of the week, the US Dollar Index (DXY) staged a decisive rebound supported by surging US Treasury bond yields. The DXY climbed above 90.00 for the first time in a week on Friday but struggled to preserve its bullish momentum with investors shifting their attention to US Nonfarm Payrolls (NFP) report. At the moment, the DXY is posting small daily gains at 89.89.

Heightened prospects for additional government spending in the US as Democrats retained the majority in the Senate after the runoff election allowed the 10-year T-bond yield to rise more than 10% in the last two days.

Investors expect the NFP to arrive at 71K in December following November's reading of 245K and see the Unemployment Rate ticking higher to 6.8%. A stronger-than-expected NFP report could provide a boost to market sentiment. Although this would likely hurt the greenback as a safe-haven, the DXY could gain traction with the T-bond yields extending the rally. 

Nonfarm Payrolls Preview: Long path to recover to be even longer.

US Nonfarm Payrolls December Preview: Labor economy woes escalate.

Technical levels to watch for