AUD/USD Forex Technical Analysis – Weak NFP Likely to Lead to Test of .6783 to .6809

The Australian Dollar is eking out a small gain early Friday as investors await the release of the U.S. Non-Farm Payrolls report for September. Earlier in the evening, Australia released its August retail update with sales coming in at 0.4% in the month.

While this figure was broadly in line with the consensus forecast of a 0.5% gain, it is a disappointing result given the scale of the policy stimulus to disposable incomes. With the RBA cutting rates in June and July, August should have started to see a meaningful lift in spending. The 0.4% gain suggests the response to lower rates by consumers has been dissatisfying.

At 05:55 GMT, the AUD/USD is trading .6755, up 0.0014 or +0.21%.

At 12:30 GMT, the U.S. government will release its September U.S. Non-Farm Payrolls report. Non-Farm Employment Change is expected to show the economy added 145K jobs last month. This is up slightly from the previously reported 130K. Average Hourly Earnings are expected to have risen 0.3% and the unemployment rate is expected to remain at 3.7%.

A weak headline number is likely to drive the AUD/USD higher.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on October 2 at .6671 and the subsequent confirmation the next day.

The main trend will change to up on a trade through .6895. This is highly unlikely today, but there is room for a counter-trend rally. A move through .6671 will negate the reversal bottom and signal a resumption of the downtrend.

Traders should watch the reaction to a test of .6775. This high was put in after the Reserve Bank cut rates on Tuesday. Taking it out could confirm the shift in momentum.

The short-term range is .6895 to .6671. Its retracement zone at .6783 to .6809 is the next upside target. Since the main trend is down, sellers could come in on a test of this area. Crossing to the bullish side of this zone will also indicate the buying is getting stronger.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Friday is likely to be determined by the U.S. Non-Farm Payrolls report.

A weak report is likely to trigger a rally into at least .6783 to .6809. Taking out .6809 could trigger an acceleration to the upside.

A stronger-than-expected report could put pressure on the AUD/USD. The first downside target is .6716, followed by .6671.

Side Notes

A stronger-than-expected U.S. jobs report will likely reduce the chances of a Fed rate cut at the end of October, but it won’t eliminate the possibility. Therefore, I don’t think it will erase the bearish reports from earlier in the week. Furthermore, an RBA rate cut in November is not a sure thing either.