AUD/USD Attempting To Break Critical Resistance Ahead Of Jobs Numbers

AUD/USD is seen in a pivotal area that would inevitably provide a clear directional bias over the medium-term. The pair is on track to post six consecutive daily gains and has exceeded the monthly open for October. The pair has breached a declining trendline dating back to May, suggesting a continuation of the broader recovery seen this year. The daily close today will be important in assessing if the break is sustained.

The currency pair was seen approaching resistance from a horizontal level at 0.7689 on Tuesday and consolidated in a 30 point range throughout the Asian and European session. A rejection was seen ahead of the level in the European session with a high of 0.7687, while momentum has picked up to the upside in North American trading with the pair scaling the resistance level. Momentum picked up following the break of the horizontal level as the pair sliced through the declining trendline.

The current rally in the pair has come after a bounce from a rising trendline that extends back to January. The pair bounced from the level last week and has shown strong momentum in the current rally.

Out of Australia, the Melbourne Institute reported their latest leading index figures to rise 0.1%, marking the second consecutive above trend result following 15 months of below trend reading. The Consumer Board reported their leading indicator unchanged, following a revised gain of 0.5% in the previous month.

Out of the United States, building permits were reported to rise 6.3% in September while housing starts declined 9%.

Next up on the economic calendar will be jobs data out of the United States at 20:30 EST. The unemployment rate is expected to tick back up to 5.7% after a reading of 5.6% last month. Employment change figures are expected to show an additional 15,200 gaining employment in September versus a decline of 3,900 in August. Recent gains in employment change have been mostly attributed to part-time employment, and that was reflected in the minutes of the latest RBA meeting. The focus on the figure will be on gains in part-time employment versus full-time employment.

The probabilities for a rate cut at the next meeting, following two rate cuts earlier this year, remains quite low. The futures markets are indicating a probability of 14%, the figure remained unchanged following the meeting minutes release this week.

The rally today has taken AUD/USD to two-month highs, making a marginal break above prior highs set in late September. On the smaller time frames, the pair has crossed over the declining trendline from April highs to August highs. A daily close above the trendline would confirm a bullish break and could show momentum picking up in the uptrend, while a failure to close higher would likely trigger a turn lower.

The correlation between AUD/USD and Copper prices had been strengthening in mid-September, but have been diverging from last week as AUD/USD has posted strong gains while Copper prices have moved lower. Copper prices are seen bouncing today from a trendline that connects January highs with early June highs. While the two instruments do not carry an exact divergence, it would be unlikely for Copper prices to break lower while AUD/USD breaks higher.

AUD/USD Daily Chart

AUDUSD Daily Oct 18

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.