AUD/USD Shows Strong Gains Supported by Positive Australian Jobs Data.

Fundamental Overview

On Thursday, AUD/USD sees a significant boost, putting an end to a four-day losing trend. The positive Australian jobs report gives the USD a slight push despite a small decline in the USD value. However, there are still potential limitations to the upside due to China’s economic challenges, ongoing US-China hostilities, and geopolitical uncertainties.

AUD/USD Pair Gains Momentum

During the early European session, the AUD/USD pair experiences a strong surge, maintaining solid intraday gains. The spot prices are hovering around the 0.6830 area, just a few pips below the daily high, indicating an end to the four-day losing streak that had reached a one-week low on Wednesday.

The Australian Dollar (AUD) gains momentum following the release of encouraging domestic employment data, pointing to a tight labor market and potentially pressuring the Reserve Bank of Australia (RBA) to consider raising interest rates in August. Additionally, some US Dollar (USD) selling further supports the AUD/USD pair, contributing to the upward intraday advance.

Moreover, the positive performance of global equity markets also plays a role in weakening the safe-haven appeal of the dollar, thus bolstering the risk-averse Australian dollar. However, concerns about China’s slowing GDP, escalating US-China tensions, and geopolitical risks temper this optimism. Furthermore, doubts surrounding the Fed’s commitment to a more dovish policy stance help keep the US dollar’s losses in check.

These factors currently prevent traders from making aggressive bullish bets on the AUD/USD pair. A bearish double-top pattern has formed near the 0.6900 level on the daily chart, signaling the need for caution before considering further upward movements. Although spot prices have temporarily halted the recent decline from a one-month peak, the situation remains fluid.

AUD/USD Technical Analysis – Daily Chart

Technical Overview:

• AUD/USD is currently trading within an upward channel.
• The pair is positioned above all Simple Moving Averages (SMA).
• The Relative Strength Index (RSI) indicates bullishness, while the Stochastic oscillator suggests an uptrend.
• Resistance level: 0.6839
• Immediate support level: 0.6817

How to Trade AUD/USD?

After a decline in price, AUD/USD has surged, and currently, it’s climbing again after retracing to the 50% Fibonacci zone. The pair is trading at a resistance zone after breaking the previous day’s high, which could potentially lead to further upside.

Trade Suggestion:

• Entry at 0.6846
• Take Profit at 0.6868
• Stop Loss at 0.6829

Conclusion

The AUD/USD pair has seen significant gains driven by positive Australian jobs data and a weakening USD. However, potential limitations to the upside exist due to various economic challenges and geopolitical uncertainties. Traders should exercise caution given the bearish double-top pattern on the daily chart. Despite the current optimism, risks remain, requiring careful consideration when making trading decisions.

Frequently Asked Questions (FAQs)

1. What caused the recent gains in AUD/USD?

The recent gains in AUD/USD were mainly driven by the release of positive Australian jobs data, signaling a tight labor market and potential pressure on the RBA to raise interest rates.

2. Why is the US Dollar (USD) weakening against the Australian Dollar (AUD)?

Some USD selling and the positive performance of global equity markets have weakened the safe-haven appeal of the USD, supporting the AUD’s advance.

3. What factors are limiting the upside potential of AUD/USD?

China’s economic difficulties, US-China hostilities, and geopolitical uncertainties are among the factors limiting the optimism for the AUD/USD pair.

4. Is the recent bearish double-top pattern on the daily chart a cause for concern?

Yes, the bearish double-top pattern near the 0.6900 level calls for caution, and traders should be careful before considering further upward positions.

5. How can traders benefit from the current AUD/USD movement?

Traders can consider a buy signal at the current resistance zone, with a potential take profit level at 0.6868 and a stop loss at 0.6829.