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AUD/USD slides amid profit-taking

Is the current rally going to continue, or is it time for a correction?

The Australian dollar declined slightly on Monday as traders locked in some profits after the recent rally. During the EU session, the Aussie was down 0.25% and trading near 0.7430.

The AUD/USD pair has staged an impressive recovery following the selling in the middle of August . Thus, it looks like the drop below the critical support of 0.7320 was a false one, and the medium-term uptrend might resume.

There are no essential macro data on the agenda today as US investors celebrate Labor day. Thus, volatility is expected to be minimal throughout the rest of the day.

Weak NFP numbers undermined greenback

Traders sold the USD on Friday as the non-farm payrolls showed the US economy created only 235,000 new jobs in August, way below the 750,000 expected . The unemployment rate slid (improved) to 5.2% from 5.4% previously, while average hourly earnings (wage growth) rose to 4.3% from 4.1% previously.

AUD/USD exchange rate

Weaker than expected NFP numbers led to a sharp sell-off of the USD, stocks moved nowhere, and precious metals soared. The AUD/USD pair remained elevated on the day after the data.

Investors are now a bit confused regarding the start of tapering since Jerome Powell failed to set a date at his Jackson Hole speech and the job creation growth seems to be stalling. Therefore, it is likely that the market will start pricing a possible delay in tapering from November to December or January. That should be negative for the greenback over the medium-term.

Additionally, the US ISM from the services sector also weakened and printed 61.7 in August, down from 64.1 in July , but the employment subindex remained above 50.0.

Bulls remain in charge while above the 50-day average

The 50-day moving average now stands at 0.7350, and as long as the Aussie trades above it, the short-term outlook seems bullish.

The short-covering squeeze in AUD/USD ties in with the rebound in China Tech stocks, but last week’s return over 0.7450 appears overdone. Short-term holding above 0.7390, the AUD/USD pair could inch higher towards 0.7500 and the 200-DMA near 0.7560/0.7600, the daily Ichimoku cloud. This could be a significant hurdle, analysts at Commerzbank said in a note on Monday.

Alternatively, should the pair decline below the 50-day average, we could see a drop toward the previous lows near 0.7320. If the Aussie closes below that support on a daily basis, the medium-term bearish trend could resume.

A correction toward the 50-day moving average could be expected , considering the strong rally over the previous days, but bulls need to defend it for the Aussie to remain bullish.

AUD/USD daily chart Source: tradingview.com

Marek is a cryptocurrency enthusiast with several years worth of experience in the industry. He has been working with numerous cryptocurrency and FinTech projects, where his main r...

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