The Australian Dollar (AUD) rebounds strongly against the US Dollar (USD) on Friday, after Nonfarm Payrolls (NFP) data shows the US added 187K new jobs in July, undershooting estimates of 200K. The data suggests a slowdown in the labor market, which could undermine stubbornly high inflation and eventually lead to lower interest rates — negative for USD.
The Aussie had already been rising on the back of an improvement in investor sentiment reflected in the rise in Hong Kong’s Hang Seng and Nasdaq e-mini futures.
AUD/USD trades half a percent higher in the upper 0.65s during the US session.
AUD/USD is in a sideways trend on both the long and medium-term charts. The February high at 0.7158 is a key hurdle, which if vaulted, will alter the outlook to one that is more bullish longer term.
The 0.6458 low established in June is a key level for bears, which if breached decisively, would give the chart a more bearish overtone. Price is currently moving down nearer to this key low.
Australian Dollar vs US Dollar: Weekly Chart
Price has now broken cleanly through the confluence of moving averages (MA) close to 0.6700, made up of most of the major SMAs – the 50-week, 50-day and 100-day. The breaching of this key support and resistance level is a bearish sign.
Australian Dollar vs US Dollar: Daily Chart
It is possible price may have completed a Measured Move pattern or three wave ABC correction (see daily chart), in July. If so, there is a chance it may be about to start a short-term upcycle.
AUD/USD has now also broken below the 0.6600 June lows on an intraday basis, and a continuation down to the key May lows at 0.6460, is quite possible. A decisive break below them would open the way for a move down to 0.6170 and the 2022 lows.
Because the pair is in a sideways trend overall it is unpredictable and the probabilities do not favor either bears or bulls overall – nor is the Relative Strength Index (RSI) providing much insight on either timeframe.
In technical terms, a ‘decisive break’ consists of a long daily candlestick, which pierces cleanly above or below the critical level in question and then closes near to the high or low of the day. It can also mean three up or down days in a row that break cleanly above or below the level, with the final day closing near its high or low and a decent distance away from the level.
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