AUD/USD Forex Technical Analysis – Supported by Hawkish RBA Expectations Ahead of US Non-Farm Payrolls Data

The Australian Dollar is edging lower on Friday after hitting its highest level since April 22 earlier in the session. The selling pressure is likely being fueled by position-squaring ahead of Friday’s U.S. Non-Farm Payrolls report.

Shortly after the opening, prices jumped to a six-week high, helped by hopes for China’s recovery from lockdowns and on expectation of domestic interest rate hikes.

At 08:08 GMT, the AUD/USD is trading .7259, down 0.0006 or -0.08%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.92, up $0.81 or +1.14%.

Thursday’s Recap

Mixed U.S. economic data gave succor to hopes that the Federal Reserve might pause or temper the pace of rate hikes later this year, while bets are leaning toward the hawkish side for the Reserve Bank of Australia.

In the U.S. on Thursday, investors were digesting employment data released by ADP, which showed the slowest job creation pace of the pandemic-era recovery.

Meanwhile, the RBA raised rates by 25 basis points (bps) last month, and traders are sure they will do so again next week, pricing about an 80% chance of a larger 40 bp hike. Additionally, about a third of economists polled by Reuters expect a 40 bp hike.

Looking Ahead to Friday…

Today’s U.S. Non-Farm Payrolls report, due to be released at 12:30 GMT, is expected to show the economy added 328,000 jobs in May, down 100,000 from April, according to a Dow Jones survey. Consensus estimates call for wages to rise by 0.4%, a faster pace than April’s 0.3% increase. The Unemployment Rate is expected to have dipped to 3.5%, down from 3.6%.

Traders, but more importantly, the Fed will be watching the average hourly wages number very closely. A higher than expected reading might signal that the Fed has to be more aggressive with policy to put pressure on inflation.

A weaker number could support those who believe a recession in the U.S. is imminent. This could encourage central bank policymakers to ease policy, which could be bullish for the Australian Dollar.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up earlier in the session. A trade through the intraday high at .7283 will signal a resumption of the uptrend.

A move through .6829 will change the main trend to down. This is highly unlikely, but the AUD/USD is in a position to form a potentially bearish closing price reversal top.

The minor trend is also up. A trade through .7141 will change the minor trend to down.

On the upside, potential resistance is the retracement zone at .7245 to .7343.

On the downside, potential support is the retracement zone at .7218 to .7143. This is followed by another support zone at .7056 to .7002.

Daily Swing Chart Technical Forecast

Trader reaction to .7265 will likely determine the direction of the AUD/USD on Friday.

Bullish Scenario

A sustained move over .7265 will indicate the presence of buyers. Taking out the intraday high at .7283 will indicate the buying is getting stronger. This could trigger an acceleration into .7343.

Bearish Scenario

A sustained move under .7265 will signal the presence of sellers. This could trigger a quick break into .7245, followed by .7217. The latter is a potential trigger point for an acceleration into the support cluster at .7143 – .7141.

Side Notes

A close under .7265 will form a closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.