Will a hot U.S. jobs report trigger an AUD/USD breakdown? Watch these key support levels as the Aussie dollar tests a crucial rising wedge pattern ahead of key employment data.
After retreating from a near two month high on Thursday, the Aussie dollar (AUD/USD) continues to tread water in early Friday trade, suggesting that traders remain on edge about bidding the pair higher ahead of key U.S. employment data later today that could influence the Federal Reserve’s interest rate outlook.
AUD/USD's Rally Faces a Test from U.S. Jobs Data
Earlier this week, the AUD/USD continued to build onto last week’s gains following U.S. and Japanese authorities intervening in currency markets to support the embattled yen, helping it recover from trading near four-decade lows. The pair also attracted buying interest thanks to lower oil prices on renewed optimism about a potential ceasefire or a deal in the Persian Gulf. However, after reaching its highest level since mid-June, traders locked in profits and squared positions on Thursday before today’s key U.S. employment data.
In recent months, Federal Reserve Chair Kevin Warsh has provided little detail about the direction of U.S. interest rates, other than to reaffirm that the central bank will rely on key economic reports to set policy. Therefore, market participants will be watching today’s jobs report closely, with a surprise having the potential to move the Greenback significantly, and by extension, drive volatility in the AUD/USD.
In particular, traders will closely monitor the non-farm payrolls print, which analysts expect will show that the U.S. economy added 88,000 new jobs last month, up from 57,000 in June. A stronger-than-expected number would add tailwinds to the dollar and pressure the Aussie as it would signal a robust labor market and more hawkish Fed, while a softer an anticipated reading would open the door to the Aussie dollar resuming its recent uptrend.
What the 1-Hour Chart Indicates About AUD/USD’s Next Move
The AUD/USD has traded cautiously higher this week within a rising wedge, a chart pattern that suggests a potential breakdown if the pair’s price falls below the formation’s lower trendline. However, in early Friday trade, the price continues to find support near the low of the pattern, suggesting uncertainty ahead of today’s U.S. employment report.
3 Key Support Levels to Watch if AUD/USD Breaks Down
Firstly, traders should keep a close eye on the key 0.7020 level. This area on the chart could attract buying interest near a vital horizonal line that sits just below this week’s low and connects three prominent peaks that formed in the second half of July.
AUD/USD Bulls’ failure to defend this level could see the pair fall to around 0.7010. Traders will likely monitor this location near the upward sloping 200 MA and a horizontal line that links a series a corresponding price action on the chart stretching back to mid-July.
A decisive close below this level opens the door for a move toward lower support at 0.6990. A decline into this region may see traders look to initiate long positions near a key trendline that connects several peaks and troughs on the chart between mid-July and early August.
AUD/USD's Next Resistance Zone Comes into Focus
If the lower trendline of the rising wedge becomes a base for the AUD/USD, the pair could advance toward an important zone of resistance on the chart between 0.7040 and 0.7060. Traders who have accumulated at lower prices over the past two weeks could seek exit points in this area between the July and August highs.
AUD/USD Sentiment Reflects Uncertainty Ahead of Jobs Data
Despite, the AUD/USD’s move higher in recent weeks, the pair sits on the precipice of a potential breakdown from a rising wedge pattern if today’s U.S. employment report comes in hotter than expected and raises bets that the Fed could move to a more hawkish interest rate outlook. Conversely, a softer than anticipated non-farm payrolls number would place downward pressure on the Greenback, potentially acting as a catalyst for the Aussie dollar to continue its move higher.
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