- Summary:
- AUD/USD needs to have a hugely positive employment change in order to challenge and take out 0.7800, setting new 2-year highs.
A slight pullback on the AUD/USD precedes this month’s employment data. This was caused by USD strength, driven by rising US Treasury yields. Momentum for the AUD/USD could come from the employment data, before China’s economic resumption from the Chinese New Year holidays comes to bear on the market.
Scheduled for release at 00:30 GMT Thursday morning, January’s Employment Change is forecast at 30.2K (previous 50.0K) while the unemployment rate is projected to have dropped from 6.6% to 6.5%. This sends mixed signals.
The RBA does not expect Australia’s labor market to bounce back to pre-pandemic levels until 2023. The RBA could remain dovish until inflation and employment targets hit the bank’s targets. This is probably why employment change needs to radically surprise the markets to the upside to continue the uptrend above 0.7800.
Technical Playbook for AUD/USD
Employment change needs to exceed the previous reading of 50.0K by more than a mile, with the unemployment rate staying static or dropping to 6.5% or less, to provoke a renewed attempt at breaching 0.7800. The 5 March 2018 high at 0.78911 could be the next upside target if 0.7800 is taken out. The bullish flag’s measured move needs to hit 0.79854 and depends on 0.78911 giving way as well.
On the flip side, failure to hit the 32.0K market projection for employment change, or a higher-than-expected jobless rate could trigger a move towards 0.76555. This potentially sends price back into the flag and if the lower border of the flag is the preferred target for a correction (at 0.75141), then 0.75859 faces the risk of breakdown. Only a drop below the 0.75141 support negates the flag pattern and makes 0.74640 relevant to sellers once more.
AUD/USD Daily Chart
