Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7250.
- Add a stop-loss at 0.6935.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6935.
- Add a stop-loss at 0.7250.
The Australian dollar rally continued, reaching its highest level since 2024 after the US released a strong jobs report. The AUD/USD pair soared to a high of 0.7125, up substantially from the year-to-date low of 0.6600.
US to Release Inflation Report on Friday
The AUD/USD exchange rate continued its strong rally this week as market participants reacted to the latest non-farm payrolls (NFP) report. This data showed that the economy created over 130k, much higher than the sector median of 70k.
The unemployment rate retreated to 4.3%, while wage growth gained steam during the month. All this happened as manufacturing and healthcare jobs rose, while private payrolls retreated.
In theory, these numbers mean that the path to more rate cuts will be challenged. However, economists warn that the labor market is still fragile, with the number of layoffs announced this year so far rising. Companies like Target and Amazon have announced huge layoffs.
Also, there is a risk that the BLS will downgrade the report in the next NFP data as it has done in the past few months.
The AUD/USD will next react to the upcoming inflation report that will come out on Friday. Economists polled by Reuters and Bloomberg expect the report to show that the headline and core inflation figures continued falling in January.
Therefore, there is a likelihood that the divergence between the Fed and the Reserve Bank of Australia (RBA) will continue. Economists expect that the RBA will continue hiking interest rates as the Fed either cuts or holds them steady in the foreseeable future.
AUD/USD Technical Analysis
The weekly chart shows that the AUD/USD pair continued the uptrend. It has jumped in the past six consecutive weeks, reaching a high of 0.7125, its highest point in years.
The pair moved above the key resistance level at 0.6932, its highest point in September 2024. At the same time, the Average Directional Index (ADX) moved to 23, its highest point in weeks.
The pair has soared above the 50-week and 100-week Exponential Moving Averages (EMA), while the Relative Strength Index (RSI) continued rising. Therefore, the pair will likely continue rising as bulls target the key resistance level at 0.7250.
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