The Aussie dollar rallied to its highest level since June on Monday, but this week’s Australian jobs report and Middle East tensions could test the pair’s recent bullish momentum. Watch these key chart levels.
The Aussie Dollar (AUD/USD) continues to consolidate in early trade on Tuesday after touching its highest level since early June Monday, boosted by dwindling bets of a September rate hike following last week’s tame U.S. economic data. However, questions remain about whether the rally can continue this week as traders turn their attention to key Australian employment data and escalating geopolitical tensions in the Middle East.
Top Regulated Brokers
Australian Jobs Data and Middle East Risks Shape AUD/USD Sentiment
After rallying to a multi-month high on Monday after last week’s softer-than-expected U.S. economic data put downward pressure on the Greenback, traders will assess this week’s Australian jobs report and the prospect of a prolonged conflict in the Middle East to determine if the pair’s bullish momentum is likely to continue.
On Thursday, the Australian Bureau of Statistics releases employment data that economists expect to show the nation’s employment change in July fell to 11,400, while unemployment remained steady at 4.4%. Readings that reveal a hotter-than-anticipated domestic labor market have the potential to keep the Aussie dollar’s rally alive and power its next move higher, especially coupled with Reserve Bank of Australia (RBA) Governor Michele Bullock’s slightly more hawkish policy outlook compared to her Federal Reserve (Fed) counterpart Chair, Kevin Warsh, who continues to give little away about the central bank’s next rate move. However, employment numbers that fall short on consensus could give traders further reason to continue booking profits after the pair’s recent advance.
Sentiment surrounding the AUD/USD, which is often regarded as a risk-on proxy, will also likely be influenced this week by developments in the Middle East. On Monday, the pair lost ground after U.S. President Donald Trump rejected the idea of extending a ceasefire that had been in place since mid-June and threatened to bomb ally Oman if it interfered in efforts to open the critical Strait of Hormuz. Further escalation in the region could add to the Aussie dollar’s recent pullback.
AUD/USD Price Action Suggests a Pause After the Breakout
The AUD/USD staged a decisive breakout from an extended rising wedge to kick off the week but has subsequently retraced to retest the pattern’s upper trendline. It’s worth noting the recent decline in trading volume, indicating to traders that the pullback may be nearing its completion.
AUD/USD Support Levels Show Where Buyers May Reappear
If Aussie dollar bulls fail to defend the rising wedge pattern’s upper trendline near Monday’s initial breakout point, watch for a possible fall to around 0.7090. This area on the chart finds a confluence of support from the nearby 50 moving average and several prominent peaks that formed earlier this month
A convincing close below this crucial level would open the door to a test of lower support near 0.7080. Traders may view this as a high probability area to accumulate long positions around this week’s low, which also closely aligns with the Aug. 7 wide-ranging bar high that formed following July’s soft U.S. jobs report.
AUD/USD Resistance Levels Highlight the Rally’s Next Test
Buying from current levels near the rising wedge pattern’s upper trendline could propel a move toward 0.7130. Traders may see this as a suitable location on the chart to scale out of long positions near Monday’s swing high, which also marks the pair’s highest trading level since early June.
To project a bullish target above Monday’s high, we can use Elliot Wave analysis. When applying this technique, we measure the distance of the pair’s first wave higher and apply that amount to the low of the current pullback. This forecasts a target of around 0.7135, implying upside of about 40 pips from recent prices. We measured wave one of the Elliot Wave pattern as it’s typically the most comparable in move to wave five.
Australin Employment Data, Middle East Escalation Threatens AUD/USD’s Rally
The AUD/USD’s rally higher driven by softer-than-expected U.S. economic data will be tested this week as traders shift their attention to data revealing the health of the Australian labor market and the potential for further flare ups in tensions between the U.S. and Iran following the expiry of a ceasefire agreement that has been in place since June. With the RBA and Fed likely to keep interest rates on hold for the immediate future, economic data and geopolitical risk will likely dictate whether the pair can continue its upward momentum or retest key support levels.
Ready to trade our analysis of the AUD/USD? Here is our list of the best Forex brokers worth checking out.