AUDUSD Forecast – Momentum Trending Lower Ahead of NFP Report

The Australian Dollar is edging lower against the U.S. Dollar on Friday as traders positioned themselves ahead of the U.S. Non-Farm Payrolls report, due to be released at 13:30 GMT.

At 08:04 GMT, the AUDUSD is trading .7062, down 0.0015 or -0.22%.

US Non-Farm Payrolls Report Sets the Tone

The U.S. Labor Department’s closely watched employment report is expected to show that nonfarm payrolls increased by 185,000 last month after rising by 223,000 in December, according to a Reuters survey of economists.

Average hourly earnings are forecast rising 0.3% after a similar gain in December. That would lower the year-on-year increase in wages to 4.3% from 4.6% in December.

The unemployment rate is expected to tick up to 3.6% from a more than 50-year low of 3.5% in December. Coming in at this figure would allow the Fed, focused on wage inflation, to maintain a moderate pace of rate hikes and reduce the risk of a recession this year.

Trader Reaction

A weaker-than-expected report will support the case for the Fed’s early exit from its rate hiking campaign in March. This would be potentially supportive for the AUDUSD. Strong data, especially average wage growth, could greenlight more rate hikes from the Fed after March and a terminal rate above 5%.

Daily AUDUSD Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower following the confirmation of Thursday’s closing price reversal top.

A trade through .7158 will negate the potentially bearish chart pattern and signal a resumption of the uptrend. A move through .6984 will change the main trend to down.

The minor range is .6984 to .7158. The AUDUSD is currently trading on the weak side of its pivot at .7071, making it resistance.

The nearest support is a 50% level at .7009. The closest resistance is the price cluster at .7137 to .7158.

Daily AUDUSD Technical Forecast

Trader reaction to the minor pivot at .7071 is likely to determine the direction of the AUDUSD on Friday.

Bearish Scenario

A sustained move under .7071 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into a 50% level at .7009, followed by the main bottom at .6984.

Taking out .6984 will not only change the main trend to down, but it could trigger an acceleration into .6893.

Bullish Scenario

A sustained move over .7071 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the resistance cluster at .7137 to .7158. The latter is a potential trigger point for an acceleration to the upside with .7283 the next major target.