- 0AUD/USD rebounds from 1-week lows hit this Thursday.
- An unexpected drop in unemployment in Australia offers some support to the Aussie.
- A modest pullback in the dollar provides an additional boost amid a nice recovery in risk sentiment.
The pair AUD/USD reverses an intraday drop to levels below 0.6900 and bounces back. The pair continues its recovery movement during the first half of the European session and reaches a new daily high around the 0.6970 zone in the last hour.
The Australian dollar is buoyed by the unexpected drop in the national unemployment rate, which fell to a 48-year low of 3.4% in July. Aside from this, a positive shift in global risk sentiment triggers a modest US dollar pullback from a new monthly high and benefits the risk-sensitive Aussie. That said, any significant positive moves still look elusive, warranting aggressive bullish traders’ caution and positioning for any further gains.
The surprising decline in the Australian unemployment rate was accompanied by a decline in the participation rate. The data wasn’t all that good: the economy lost 40,000 jobs in the month it was released, expectations of a gain of 25,000 by a wide margin. This comes on the back of softer wage growth data on Wednesday, which could force the Reserve Bank of Australia to be more flexible in its policy tightening cycle and eventually act as a headwind for the aussie.
On the other hand, growing concerns about a global economic slowdown should dampen any bullish moves in the markets, which could further support the Australian currency. Furthermore, expectations that the Federal Reserve will remain on its path of monetary policy tightening support the prospect of some dollar buying. These bets were confirmed by the minutes of the FOMC meeting on July 26 and 27, which indicated that policymakers would not consider stopping interest rate hikes until inflation had come down substantially.
The pair’s chart looks balanced. After several days of losses and red candles, the price has settled on the 50-day SMA, a key defensive level where buyers, although many of them are just day traders looking to play the bounce, are sure to enter strongly. However, the overall technical tenor of the chart remains rather bearish, and further losses are possible if it breaks down and closes below the 50-day SMA.
Fed expectations remain supportive of elevated US Treasury yields, further favoring dollar bulls and acting as a downside factor for AUD/USD. This suggests that the path of least resistance may be to the downside and any subsequent moves to the upside could be seen as a selling opportunity.
Regarding the US economic agenda, the survey of the manufacturing sector prepared by the Philadelphia Federal Reserve, known as the Philly Fed, showed a rise in the main indicator from -12.3 to 6.2, which widely exceeded expectations. they were for a recovery to -5.
Technical levels
Source: Fx Street
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