Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6865.
Add a stop-loss at 0.7100.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.6865.
The AUD/USD pair has moved sideways and is hovering at its highest level in over a month as traders wait for the upcoming Australian jobs report. It jumped to 0.7027, up by over 2% from the lowest level this month.
Australia Jobs Data and China Stimulus Hopes
The AUD/USD pair has been rising in the past few weeks, moving from a low of 0.6864 to a high of 0.7027. This rebound happened after the Reserve Bank of Australia (RBA) delivered its interest rate decision in June. While the bank left interest rates unchanged, officials noted that inflation remained stubbornly high and left the door open for more hikes.
The pair has also risen as traders prepare for potential Chinese stimulus after the country published weak data last week. According to the National Bureau of Statistics (NBS), the economy expanded by just 4.3% in the second quarter, the worst growth rate in years. A stimulus package would be bullish for Australia because of the amount of goods that China buys from Australia.
The AUD/USD pair will next react to the upcoming Australian jobs numbers that comes out on Thursday. These are important numbers because they normally provide more color on the state of the economy and help the RBA when making its decision in August.
Economists expect the data to show that the economy created 15.2k jobs in June. If this is the correct number, it will mark a substantial decline from the 40.3k jobs it created in the previous month. They also expect the data to show that the unemployment rate remained unchanged at 4.4%.
A stronger-than-expected jobs report will push the Reserve Bank of Australia (RBA) to hike interest rates in the coming meeting. Besides, the ongoing US-Iran war is expected to boost inflation in the near term.
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AUD/USD Technical Analysis
The AUD/USD pair dropped to a low of 0.6864 earlier this month and started moving upwards, forming an ascending channel. This rally, however, is losing momentum as evidenced by the falling Average Directional Index (ADX), which has dropped from a high of 41 to the current 24.1.
The channel is part of the bearish flag pattern, a common continuation sign in technical analysis. Therefore, the pair will likely resume the downward trend, potentially to the key support level of 0.6865.
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