AUD/USD falls back to 0.6450 as USD recovers

• AUD/USD pulled back below the 20-day SMA towards 0.6450.
• The US August NFP report sent mixed signals from the US labor market.
• The dollar benefited from higher than expected ISM PMIs.

In Friday’s session, the US dollar initially fell and found support at the 20-day SMA of 103.30, but then managed to rally towards 104.20. The US released mixed Non-Farm Payrolls and strong PMI numbers, while the Australian calendar had nothing relevant to offer, so USD moves mainly led the pair’s moves.

The report on Non-Farm Payrolls, which measures the change in employment in the non-farm sector, showed that the US added 187,000 jobs in August, slightly more than the 170,000 expected and the 157,000 revised downwards. . On the downside, average hourly earnings rose, but more slowly than expected, while the unemployment rate rose to 3.8% in the same month.

What lifted the dollar was data from the Institute for Supply Management (ISM), which reported higher than expected August PMIs, with the manufacturing index at 47.6, above the 47 expected. The employment index also stood at 48.5, but remains in contraction territory.

In reaction, 2.5 and 10-year US Treasury yields fell to their lowest levels in three weeks, but later managed to pare their declines following the release of ISM PMIs. Along these lines, CME’s FedWatch tool shows that the odds of a hike at the Fed’s November meeting dropped to 33%, after hovering around 40% in recent days. Notably, market volatility on Friday was driven by investors’ digesting of key economic data. Federal Reserve (Fed) Chairman Powell stated that ongoing decisions will be decided “carefully” based on incoming data.

AUD/USD levels to watch

AUD/USD daily chart analysis points to short-term bearish sentiment. The Relative Strength Index (RSI) is below its midline in negative territory, showing a bearish trajectory. Also, the moving average convergence divergence (MACD) shows red bars, which signifies increasing bearish momentum for the AUD/USD. Furthermore, the pair is sitting below the 20,100 and 200-day SMAs, indicating that in the bigger picture, bears are still in command, and buyers have work to do.

Support levels: 0.6430, 0.6400, 0.6390.

Resistance levels: 0.6460 (20-day SMA), 0.6480, 0.6500.

AUD/USD Daily Chart