AUD/USD Forex Technical Analysis – Employment Reports Fueling Short-Covering Rally with .6889 – .6900 Potential Target

The Australian Dollar is trading higher early Thursday after the latest official data showed a fall in both unemployment and underemployment. The Employment Change showed the economy added 39.9K jobs in November. This was well above the 14.5K forecast. The prior month’s number was revised lower to -24.8K. The Unemployment Rate fell to 5.2%. Economists were looking for a reading of 5.3%.

At 02:49 GMT, the AUD/USD is trading .6871, up 0.0018 or +0.26%.

The Aussie rallied because the prospects for another rate cut from the Reserve Bank of Australia (RBA) in February have dimmed following news employment rebounded strongly, and unemployment fell, during November.

According to implied pricing from interbank futures, the odds of a rate cut at the RBA’s first meeting of 2020 have fallen to 44 percent, down from 63 percent earlier Thursday.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the closing price reversal top was formed on December 13.

A trade through .6939 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through .6800.

The major retracement zone is .6877 to .6925. This zone is controlling the longer-term direction of the AUD/USD.

Inside the major retracement zone is a short-term retracement zone at .6889 to .6900. This is also resistance. Aggressive counter-trend sellers could come in on a test of this zone. They’re going to try to form a secondary lower top.

The main range is .6671 to .6939. Its retracement zone at .6800 to .6770 is the next downside target. This area is potential support.

Daily Technical Forecast

Based on the early price action, the direction of the AUD/USD on Thursday is likely to be determined by trader reaction to the major 50% level at .6877.

Bullish Scenario

A sustained move over .6877 will indicate the presence of buyers. This could create a labored rally with potential targets the short-term 50% level at .6889, and a support cluster at .6899 to .6900.

Bearish Scenario

A sustained move under .6877 will signal the presence of sellers. If this move creates enough downside momentum then look for a retest of .6838, followed by an uptrending Gann angle at .6824.