AUD/USD drifts below 0.6500 with the Dollar picking up ahead of the NFP report

• FX traders are paring back their USD short positions ahead of the US NFP release.
• US Nonfarm Payrolls are expected to show a 130,000 increase in May.
• A weaker-than-expected reading might heighten hopes of Fed easing and send the USD lower.

The Australian Dollar extends losses below 0.6500 on Friday as traders trim their US Dollar short positions ahead of the US Nonfarm Payrolls report. The pair's broader trend remains positive, but the double top at 0.6530 hints at a strong resistance area.

All eyes today are on the US Nonfarm payrolls report, which will be observed with particular interest, after a string of negative US releases earlier this week revived fears of a recession.

Market forecasts anticipate a 130,000 increment on private employment in May, following a 177,000 rise in April, with the Unemployment Rate steady at the previous 4.2% level.

Downbeat NFP figures might boost hopes of Fed easing

Earlier this week, ADP Employment figures showed a much lower than expected reading, 37k against the 115K expected. Beyond that, Manufacturing activity contracted beyond forecasts and, unexpectedly, the Services sector showed a similar picture. After these figures, markets are wondering whether a 130K increase in Payrolls is not too optimistic a view.

Another weak release today will increase concerns about the US economic momentum and might convince the Fed to abandon its neutral stance and lower interest rates further to avoid a deeper economic slowdown. This might add pressure on the USD.

The Australian calendar has been light today, although the impact of a softer-than-expected Australian GDP and the RBA's dovish minutes has been minimal, with US economic data and Trump's ongoing tariff saga as the main market movers this week.