On the daily chart below, we can see that after a huge rally in the US dollar in May due to strong economic data and a hawkish repricing of interest rate expectations, the AUD/USD pair exited the 3-month long range. At the beginning of the week, the price seemed to have fallen to retest the broken support-turned-resistance, then continued lower, with 0.6168 as the final target.
Unfortunately, some Fed members talked about a pause in June to collect more data before deciding on another hike. What we saw in the aftermath was a quick unpacking of the upbeat outlook which was also supported by yesterday’s soft data in the ISM Manufacturing PMI and Labor Cost reports. The price is now approaching the red 21 SMA and we are likely to find sellers there targeting another breakout and finally below 0.6168.
AUDUSD technical analysis
AUDUSD daily
On the 4 hours chart below, we can see that AUDUSD broke above the downtrend line yesterday and the bullish momentum increased as the buyers jumped aggressively in the bullish wave. This rally has extended a bit though as evidenced by the price’s distance from the blue 8 moving average.
Generally, in such cases, the price consolidates or pulls back before the next move. We can also notice that the latest low of 0.6450 was diverging as the MACD indicates that the bearish momentum was weakening. Divergences generally indicate an incoming pullback or reversal.
AUDUSD 4 hours
On the hourly chart below, we can see that the sellers do not have strong resistance levels to rely on at the moment as the only good level comes at 0.6680 where we can find the confluence of 61.8% Fibonacci retracement and the previous swing resistance.
What the sellers would like to see is a break below 0.6563 support which would turn the short-term bullish structure into a bearish one, then build up to target 0.6460 low first and 0.6168 after that. On the other hand, buyers will have the area between 0.6563 and 0.6580 as support for another push to the upside towards the 0.6680 resistance.
1 hour AUDUSD
Today, all eyes will be on the US Non-Farm Payrolls (NFP) report, with the potential for different results:
- If the data exceeds expectations and is accompanied by higher-than-expected average hourly earnings, it is likely to raise the probability of a rate hike in June and may also indicate the possibility of a rate hike in July. This particular scenario could raise concerns within the market about a potential wage and price spiral.
- Conversely, if the data is positive but below expectations in terms of average hourly earnings, it is expected to increase USD weakness, as it will not significantly affect price expectations. In this case, the market will be eagerly awaiting the Consumer Price Index (CPI) report due next week.
- If the data disappoints in all aspects, it will be considered negative news and may lead to risk aversion in the markets, which will lead to an increase in demand for the US dollar. However, given the recent comments made by Federal Reserve officials, we may notice a weakening of the US dollar due to the diminishing expectations regarding future rate hikes.