AUD/USD has consolidated after a rally to multi-month highs. Will key U.S. employment data extend the pair’s momentum or trigger a reversal?
The Aussie dollar (AUD/USD) continues to gain ground in early trade on Tuesday following a pullback after hitting a multi-month high driven by news that Japanese and U.S. authorities had stepped in to support the embattled yen. Despite the risk-on trade gathering momentum on signs of a potential breakthrough in the Middle East and sliding oil prices easing rate hike fears, the pair appears to be bracing for key U.S. employment data set for release later this week.
Why U.S. Employment Data Matters for AUD/USD This Week
Following the AUD/USD’s yen-intervention driven rally last week that saw the pair climb as high at 0.7050, traders’ attention will quickly shift to this week’s eagerly awaited U.S. employment data. On Thursday, traders will digest weekly initial jobless claims data, along with last month’s ISM Non-Manufacturing PMI number, while on Friday, all eyes will turn to the July jobs report that publishes average hourly earnings, nonfarm payrolls and the unemployment rate.
Traders will watch these numbers closely because recently minted Federal Reserve Chair Kevin Warsh has empathized that key economic data will determine how the central bank sets interest rates. Therefore, a hotter-than-expected report would be interpreted as hawkish for the Greenback and could subsequently place downward pressure on the Aussie dollar. However, a softer-than-anticipated reading on the labor market would likely weaken the U.S. dollar, helping place a tailwind behind the AUD/USD.
Traders will also this week assess Australian consumer confidence and June job advertisement data, but barring a major surprise, these releases will likely take a back seat to Friday’s U.S. employment report.
What the AUD/USD 1‑Hour Chart Suggests About Momentum
Since bottoming out near the lower trendline of a descending channel on July 29, the pair rallied sharply on the yen intervention news, breaking convincingly above the pattern before retracing toward the closely-watched 200 MA throughout most of Monday. In early Tuesday trade, however, the price continues to catch a bid, potentially indicating that traders are positioning for the AUD/USD’s next leg higher.
Key AUD/USD Resistance Zones Traders Are Watching Now
The first overhead area worth monitoring sits near 0.7020. Traders who accumulated on the recent pullback could look for quick profit taking opportunities near the 23.6% Fibonacci level, the downward sloping 50 MA and three notable peaks that emerged on the chart between July 15 and July 23.
A decisive close above this level opens the door to a move toward the key 0.7050 region. This area on the chart would likely be closely watched by traders as it marks a multi-month high and the top of the Fibonacci grid. Depending on the timing, it could also coincide with an overbought relative strength index (RSI) reading, placing further selling pressure on the pair.
Important AUD/USD Support Levels That Could Be Tested
Traders will likely keep a close eye on the 0.6990 area. This region on the chart finds a confluence of support from a horizontal trendline extending back to the July 14 high, the 200 MA and the crucial 50% Fibonacci retracement level when stretching a grid from the July 29 low to Aug. 3 high.
A breakdown below this important level back into the descending channel could see the pair retest a lower support floor around 0.6970. This location may attract buying interest near the respected 61.8% Fibonacci retracement level and a horizontal line that links the prominent July 10 peak with multiple troughs that formed on the chart last month.
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How Risk‑On Sentiment and Yen Support Are Influencing AUD/USD
Following the AUD/USD’s early-week pullback from a multi-month high, the pair may continue strengthening this week on signs of further yen intervention from Tokyo and Washington and weakening oil prices. However, the Aussie dollar will more likely be driven by crucial U.S. employment data later this week that could influence the Federal Reserve’s interest rate policy outlook.
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