Double Top in Sight, AUD/USD Ready to Test NFP Volatility
What happened? The Australian Dollar (AUD) held firm against the US Dollar (USD) on Thursday (4/7), with the AUD/USD pair moving steadily above the 0.6560 level, even though Australia's May trade surplus data was reported lower than expected. AUD's performance remained resilient thanks to the weakening US Dollar, which was triggered by investor cautious sentiment ahead of the release of the US Nonfarm Payrolls (NFP) report.
Why can AUD remain strong? The key to today's AUD strengthening is the weakening US Dollar globally. The ADP Employment report released on Wednesday showed that the US private sector lost 33,000 jobs in June, contrary to market expectations which projected an increase of 95,000. This data increased expectations of an interest rate cut by the Federal Reserve (The Fed) and made market players refrain from taking large positions in the US Dollar.
What is the market waiting for? The market is now awaiting the official NFP report tonight, which is expected to provide a clearer picture of the health of the US labor market and the direction of the Fed's monetary policy going forward. The release of this data is expected to trigger high volatility in the US Dollar, which could have a direct impact on the direction of AUD/USD in the near term.
What is the technical condition? From a technical perspective, the pair's trend is still showing a bullish pattern with higher highs and higher lows remaining intact, while the intraday RSI indicator is holding above 50, indicating that momentum is still positive. However, the current price is approaching the important resistance area at 0.6590, which appears to be forming a double top pattern. If it fails to break through this level, a correction could occur.
What is the potential for the next movement? If AUD/USD falls through the support at 0.6546 (the lowest level on June 2), then the double top pattern will be confirmed. The next downside target is around 0.6510, which is the 38.2% Fibonacci retracement level of the June 23-July 1 increase.
Source: (ayu-Newsmaker)
