AUDUSD is being sold heavily in today’s Asian trading session despite the surge in employment in Australia. The currency pair is the biggest loser thus far today as it is down by 0.28% at 0.6988.
The Australian Bureau of Statistics reported that employment in June rose by 210,800. This was well above the forecast which was set at 106,000. However, there were a few sore spots in the labor market which could explain why AUDUSD is under selling pressure. For one, the reading for May was revised lower from 227,700 to 264,100. Additionally, the unemployment rate ticked higher to 7.4% from 7.1% in May. This was also more than the consensus which was at 7.2%. This also marked the highest unemployment reading for Australia since 1978. A closer look at the surge in employment for July would show that it was heavily driven by part-time work.
It would also seem that the positive Chinese GDP report is not enough to keep AUDUSD afloat. Earlier today, it was also reported that Australia’s largest trading partner grew by 3.2% which was more than the forecast for Q2 2020 at 2.2%.
On the 1-hour time frame, it can be seen that AUDUSD has recent made lower highs after a series of higher highs. Consequently, a head and shoulders chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is widely considered as a bearish reversal indicator. A strong close below the neckline support at 0.6990 could trigger a bigger sell-off to 0.6925 where AUDUSD bottomed on July 14.
On the other hand, a strong close above today’s high at 0.7010 could mean that the head and shoulders will have already been invalidated. AUDUSD could then trade higher to 0.7037 where it topped in yesterday’s trading. If resistance at this price does not hold, the next ceiling could be at 0.7062 where it topped on June 10.
