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AUD USD maintains strength ahead of key employment data

Article By: ,  Financial Analyst
July 13, 2016 7:35 PM

AUD/USD has continued to trade within a pronounced bullish trend since its 0.7150-area lows back in late-May. This rise has formed a clear parallel uptrend channel as the currency pair has broken out to progressively higher highs within the past several weeks. The most recent breakout was on Tuesday, when AUD/USD made a new two-month high at 0.7656.

The current bullish trend began after the currency pair was pressured down to its noted May lows by an early-May interest rate cut by the Reserve Bank of Australia. Last week, the central bank opted to keep rates steady at the lower rate of 1.75% for the second month in a row, providing some support for AUD/USD. In the immediate aftermath of the UK’s Brexit vote, the currency pair took a quick plunge but then rapidly recovered to resume its upward push.

Most recently, worse-than-expected trade balance data out of China (311 billion yuan vs. 320 billion forecast) on Wednesday failed to move AUD/USD significantly to the downside, highlighting the strength of the currency pair. A potential market-mover, however, could be Australia’s release of employment change data for June, scheduled for Thursday. Data for the previous month of May showed a positive surprise. The consensus forecast for June is currently slightly above 10,000 jobs added. In addition, the unemployment rate is expected to have risen to 5.8% from the previous month’s 5.7%.

Any better-than-expected data could help push AUD/USD up towards year-to-date highs around 0.7800, last reached in April. Technical signs are positive for the near-term, with the 50-day and 200-day moving averages both pointing higher and the currency pair having just broken out above the key 62% Fibonacci retracement level of the last major down-move. Additionally, other technical indicators are showing that AUD/USD is not yet in significantly overbought territory.

The key upside level to watch on any further climb is the 0.7700 level, a breakout above which the currency pair should target the noted 0.7800-area highs followed by the 0.8000 psychological resistance level. In the event of a bearish reversal, the 0.7500 support level is critical. Any strong breakdown below 0.7500 could invalidate the current bullish trend.

 

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