Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6700.
The Australian dollar soared to its highest point since January after the weak ADP jobs report and Federal Reserve minutes. The AUD/USD pair jumped to 0.6735, its highest point since January 5th, and 5.80% above its lowest point this year.
Federal Reserve minutes and US jobs data
The US labor market softened a bit in June, pointing to a slowdown of the American economy. In a report, ADP noted that the private sector added 150k jobs in June after adding 157k in the previous month. This increase was weaker than the median estimate of 163k.
A separate report showed that initial jobless claims rose by 238k last week while the continuing claims rose to 1.85 million. These numbers came two days ahead of the upcoming nonfarm payrolls (NFP) data.
The median view among analysts polled by Reuters is that the economy created over 165k jobs in June after adding 320k in the previous month. They expect the unemployment rate to remain at 3.9%.
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Reports by the ISM and S&P Global painted a different picture about the economy. The S&P Global services PMI rose from 54.8 in May to 55.3 in June, higher than the expected 55.1. However, the ISM said that the non-manufacturing PMI dropped from 53.8 in May to 48.8 in June.
The AUD/USD pair also rose after the Federal Reserve published minutes of the last meeting. These minutes showed that the committee wanted more evidence that inflation was moving to the 2% target before determining when to start cutting interest rates.
This view was in line with what Jerome Powell said earlier this week. Therefore, analysts expect that the Fed will start cutting rates in December if inflation continues falling.
The AUD/USD pair will likely be muted on Thursday since American markets will be closed for the July 4th holiday.
AUD/USD technical analysis
The AUD/USD exchange rate continued rising after the Fed minutes. It moved to an important resistance point at 0.6712, its highest level in May and June. The pair has also moved above the 50-day and 100-day moving averages.
It has also formed an inverse head and shoulders chart pattern, which is a popular bullish sign. Also the Awesome Oscillator has remained slightly above the neutral point. The Relative Strength Index (RSI) has moved above 60. Therefore, the pair will likely continue rising as buyers target the key resistance at 0.6800.
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