Australia, NZ dollars wary as much rides on US jobs report

By Wayne Cole

SYDNEY, July 3 (Reuters) - The Australian and New Zealand dollars drifted away from multi-month highs on Thursday as investors took cover ahead of a U.S. jobs report that could decide the course of rate cuts there.

Markets are on edge after a weak reading on U.S. private employment suggested some downside risk for payrolls, where a miss would boost the chance for a July policy easing and likely pressure the U.S. dollar.

Equally, an outcome in line with or above forecasts could see the greenback rally.

Those risks left the Aussie 0.2% lower at $0.6571 AUD=D3, and just off an eight-month peak of $0.6590. Support comes in at $0.6544, with the next bull target up at $0.6687.

The kiwi dollar was stuck at $0.6078 NZD=D3, having bounced from $0.6051 overnight. More support lies at $0.6040, with resistance at the nine-month peak of $0.6120.

Sentiment on the Aussie was not helped by data showing Australia's surplus on goods trade sank to a near five-year low in May, as commodity exports took a dive while imports of capital goods jumped.

That follows a disappointing report on retail sales out on Wednesday that suggested domestic consumption remained subdued in May, cementing expectations for a cut in rates at next week's Reserve Bank of Australia policy meeting. 0#AUDIRPR

The run of soft figures saw ANZ join the other local major banks in tipping a quarter-point cut in the 3.85% cash rate on July 8, though they differ on where the easing cycle will end.

ANZ now sees cuts in July and August, instead of August and February next year, while markets are pricing almost four more easings to 2.85%.

"We think the upcoming meeting will be a much closer call than market pricing would suggest," said Adam Boyton, ANZ's head of Australian economics.

"And moving beyond 3.35% in quick succession, in the absence of a global or domestic shock, would run the risk of needing to tighten policy in late 2026 or early 2027."