Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6725.
- Add a stop-loss at 0.6520.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6520.
- Add a stop-loss at 0.6725.
The AUD/USD exchange rate rose to the highest point since September 18 as the US government shutdown started and after the US published weak jobs numbers. It rose to 0.6620, up from last week’s low of 0.6520.
US Government Shutdown and Jobs Numbers
The AUD/USD exchange rate rose as the US government shutdown started, with Democrats and Republicans differing on strategy. Democrats are using their leverage to ask for more healthcare concessions from the Republicans. Donald Trump wants a clean funding bill and has threatened mass layoffs.
The pair also rose after a report by ADP showed that the labor market deteriorated in September. The private sector lost 32,000 during the month after shedding another 3k in August. Analysts were expecting the report to show that the economy added 50,000 jobs in September.
Therefore, these numbers mean that the economy is not doing well, which may push the bank to start cutting interest rates. Another report showed that the manufacturing sector also deteriorated in September.
According to the ISM, the manufacturing PMI was 49.1 in September, a sign that it continued to deteriorate. However, the S&P Global Manufacturing PMI dropped from August to 52.0.
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There will be no major economic numbers from the United States on Thursday. As such, market participants will focus on the US government shutdown. If it continues, it means that the Bureau of Labor Statistics (BLS) will not release the latest jobs numbers on Friday.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate bounced back after bottoming at 0.6520 late last month. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).
The Relative Strength Index has moved above 50 and is pointing upwards. Most importantly, the pair has formed a megaphone pattern, which is often known as a broadening wedge. This pattern often leads to a strong bullish breakout.
Therefore, the pair will likely continue rising as bulls target the upper side of the wedge. This rally will also happen as the Federal Reserve and the RBA diverge on policies. While the Fed is cutting rates, the RBA has signaled that it will hold them steady in the coming months
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