Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6365.
- Add a stop-loss at 0.6500.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6445 and a take-profit at 0.6510.
- Add a stop-loss at 0.6365.
The AUD/USD exchange rate was relatively unchanged on the first trading day of the quarter as traders reflected on the weekend’s intrigues in the US. The pair was trading at 0.6450 as the market started to reposition for the upcoming Reserve Bank of Australia (RBA) decision and key US jobs numbers.
US avoids government shutdown
The biggest catalyst for the AUD/USD pair on Monday was news that the US government avoided a major shutdown. In a surprise move, the House of Representatives passed a bill to extend government funding for 45 days and provide disaster relief. The bill was quickly passed in the Senate.
A government shutdown would have been bad for the American economy since the government is the biggest employer. As such, it would impact an already slowing economy at a time when millions of Americans are about to start paying their student loans.
Further, the shutdown would have impacted policymakers like the Federal Reserve, who depend on crucial economic data. For example, the Bureau of Labor Statistics (BLS) would have skipped this week’s vacancies and non-farm payrolls (NFP) data.
The AUD/USD pair also reacted to weak Chinese economic numbers. The Caixin services PMI dropped from 51.8 in August to 50.2 in September, a steeper decline than the median estimate of 52.0. The manufacturing PMI also dropped from 51.0 to 50.6, worse than the expected 51.2.
These numbers mean that the Chinese economy is not doing well, which could affect Australia. Australia sells most of its goods and services to China, the second-biggest economy in the world.
The next key event to watch will be Tuesday’s Reserve Bank of Australia (RBA) interest rate decision. Most economists expect the RBA will leave interest rates unchanged in the first meeting by Michele Bullock.
AUD/USD technical analysis
The Australian dollar dropped to a low of 0.6330 last week, the lowest point since November 4th last year. On the 4H chart, the pair then rebounded and neared the key resistance point at 0.6510, the highest point on August 30th, September 1st, and 20th. It has moved between the middle and upper lines of the Bollinger Bands while the Relative Strength Index (RSI) has drifted downwards.
Therefore, the outlook for the AUD/USD pair is bearish as sellers target the next key support at 0.6400. A break below that support will see it drop to the next support at 0.6363., the lowest point on September 7th.
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