Australian Dollar Analysis and Talking Points
- AUD/USD | Risks a Breakdown on Soft Jobs Data
- Key Trendline Support Holding
- RBA Rate Cut Probability at 42%
AUD/USD | Risks a Breakdown on Soft Jobs Data
Last week, we highlighted that upside in AUD/USD could be limited with resistance at 0.6930-35 capping the pair. Since then, the Australian Dollar has extended its recent downside amid the rising concerns over the Chinese virus outbreak, which in turn prompted a dip across risk assets. However, looking forward, much of the focus will be on the Australian jobs report, which will be pivotal for the near-term outlook for the currency.
Given that market pricing for an RBA rate cut is at 42% we see two-way risks for AUD/USD, whereby a weaker than expected employment report would likely see the pair break the 0.6800 handle to test 0.6780. While a firm report could see a retest of 0.6900 as markets price out the likelihood of near-term easing. As it stands, with employment indicators signalling the labour market will continue soften, we see risks are tilted to the downside.
| Change in | Longs | Shorts | OI |
| Daily | -10% | 14% | -2% |
| Weekly | 2% | -9% | -3% |
Australian Labour Market at Risk of Softening Further
On the technical front, DMI’s signal that bearish momentum is intact and thus raises the risk of a firm break below the rising trendline stemming from the 2019 low. In such case, this would likely see a dip towards 0.6800 with a follow through to 0.6780.
AUD/USD Vanilla Options: 0.6780 (516mln), 0.6900 (411mln)
Implied Daily range (0.6807 – 0.6865)
| Support | Resistance | ||
|---|---|---|---|
| 0.6840 | Trendline Support | 0.6848 | 100DMA |
| 0.6802 | Dec 10th Low | 0.6862 | 200DMA |
| 0.6780 | Vanilla Options | 0.6883 | 50DMA |
AUD/USD Price Chart: Daily Time Frame (Jul 2019 – Jan 2020)
Source: IG Charts
--- Written by Justin McQueen, Market Analyst
Follow Justin on Twitter @JMcQueenFX
