AUD/USD consolidates losses near 0.78 handle as USD bulls take a breather

The AUD/USD pair, which started the day at 0.7860, remained under pressure throughout the day as the US Dollar Index resumed its rally on Thursday after a 2-day pause. As of writing, the pair was trading at 0.78, losing 0.8% on the day.

Today's upbeat data from the United States helped the DXY push higher in the early NA session. According to the US Department of Labor, weekly initial jobless claims decreased by 12K to 260K in the week ending September 30, pulling down the less volatile 4-week average to 268K. Other data revealed that the goods and services trade deficit in the U.S. eased to $42.4 billion from $43.6 billion, coming in better than the market expectation of $42.7 billion.

• US: Goods & services deficit was $42.4 bln in Aug, down $1.2 billion from $43.6 billion in July
• US: Weekly initial claims was 260,000, a decrease of 12,000 from previous week

Furthermore, hawkish comments from FOMC members today heightened the expectations of a December Fed rate hike, giving an extra boost to the buck. Philly Fed President Patrick Harker reiterated that he was in favor of another rate hike before the end of the year while San Francisco Fed President John Williams noted that he was expecting the Fed to continue with gradual rate hikes. The CME Group FedWatch Tool's rate hike probability in the session jumped to 86.7% and was last seen at 84.2%. In the meantime, the US Dollar Index is up 0.5% at 93.77.

The economic calendar won't be offering any data from Australia on Friday and investors are likely to remain on the sidelines until the nonfarm payroll report from the U.S. is released later in the day. "With this month's payrolls number likely to be "written off" given the effect of recent hurricanes, a decent wage number should help cement market pricing of a December hike," pointed out James Smith, Developed Markets Economist at ING.

• US: Strong wages more important than hurricane depressed jobs data - ING

Technical outlook

With today's retreat, the RSI indicator on the daily graph came very close to the 30 mark, suggesting that the pair could make a technical correction before the next leg down. The immediate support for the pair could be seen at 0.7785 (Oct. 3 low) ahead of 0.7690 (200-DMA) and 0.7600 (psychological level). On the upside, resistances are located at 0.7840 (100-DMA), 0.7930 (50-DMA) and 0.8000 (psychological level).