AUD/USD drops towards 0.7700 as challenges to sentiment dim optimism over Aussie jobs

• AUD/USD fails to keep Aussie employment-led gains amid risk-negative headlines concerning China.
• S&P 500 Futures ease from record top, US dollar bounces off three-week low.
• US Retail Sales, risk catalysts will be the key.

AUD/USD holds lower ground near the intraday low of 0.7718 during its latest pullback moves on early Thursday. In doing so, the quote consolidates the heaviest gains in two months while quickly forgetting the recently flashed Aussie employment figures.

Although better-than-forecast jobs report from Australia joins Aussie PM Scott Morison’s vaccine optimism, fears of a fresh US-China tussle seem to weigh on the risk. As the AUD/USD prices are considered a risk barometer the quote snaps a two-day winning streak while easing from the highest since late March.

China’s top diplomat from Hong Kong indirectly warns the US over its meddling in internal affairs. Further, Taiwan’s President Tsai Ing-wen signals visiting the US delegation while also saying, “Chinese military activities have threatened regional peace, stability.” Earlier in the week, Beijing has already warned Washington over its growing ties with Taiwan. With these headlines, the Sino-American tussles are back in the fashion and can challenge the sentiment.

Also on the risk-negative side could be the vaccine jitters and blood clotting issues as well as the recent halt in the US 10-year Treasury yields. The same help the US dollar index (DXY) to bounce off a three-week low and exert downside pressure on the AUD/USD prices.

Moving on, risk catalysts can keep the driver’s seat ahead of the US session where a plethora of data, led by US Retail Sales for March, will be important to watch.

Read: Australian Employment Preview: Upbeat jobs data to provide tailwind to the aussie

Technical analysis

Despite failures to stay above 50-day SMA, around 0.7720, AUD/USD keeps an upside break of a downward sloping trend line from February 25, near 0.7640 by the press time, which in turn favor the bulls.