AUD/USD rebounds from 0.7080, downside remains favored ahead of US NFP

• A short-lived pullback has pushed the asset above 0.7100.
• The monetary policy statement from the RBA has raised the inflation forecasts firmly.
• Investors are awaiting the US NFP, which is due on Friday.

The AUD/USD pair has found a minor rebound after tumbling below Friday’s open at 0.7124. The aussie bulls failed to sustain above 0.7110 in the early Tokyo session but have bounced back after the release of the Reserve Bank of Australia’s (RBA) monetary policy statement (MPS).

With respect to the RBA’s MPS, the inflation targets have risen sharply and the RBA sees them remain elevated till 2024. Australian central bank has warned that core inflation could now hit 4.6% by December, a hefty two percent gain from the figure disclosed in February. For sure, the inflation forecasts will remain above the targeted band and pricing pressures will remain a burden for the households. To curb the higher living costs, the RBA will push its Cash Rate to normalization.

Meanwhile, the US dollar index (DXY) is looking to recapture its fresh 19-year high at 103.94, recorded on Thursday. The expectation of decent additions to the labor force and an impactful slippage in the Unemployment Rate has improved the DXY’s appeal. The US Nonfarm Payrolls (NFP) is seen at 391k while the jobless rate will improve to 3.5%. An extremely tight labor market conditions are expected to bolster the Labor Price Index, which will strengthen the inflationary pressures. This has fueled the odds of a 75 basis point (bps) rate hike by the Federal Reserve (Fed) in June’s monetary policy meeting.