AUD/USD: One of better options for US dollar bears

7월 5일

The AUD/USD is the one to watch in the event we see a negative dollar reaction to today's US jobs report, which is due for release shortly. A headline print of 191K is expected, but watch out for revisions to prior months' data too.

AUD/USD's recent performance points higher

• The AUD/USD has been performing well due to strong Australian inflation and a hawkish stance from the Reserve Bank of Australia (RBA).
  
• It reached its highest level since January due to weaker-than-expected US data this week, which fueled speculation about a potential Fed rate cut in September.
  

Boost from Recent Data:
- Retail Sales: Increased by 0.6% month-over-month (m/m), surpassing the expected 0.3%.
- Building Approvals: Rose by 5.5% m/m, beating the forecasted 1.5%.

Inflation and Rate Hikes:
- Australia's latest inflation report showed a significant rise to 4.0% year-over-year (y/y), higher than the expected 3.8% and April's 3.6%.
- This has led investors to speculating over a 50% chance of another rate hike by the RBA, while expectations for a US rate cut are increasing.

AUD/USD Technical Analysis:
- The AUD/USD had been consolidating in a bullish continuation pattern near its highs.
- It recently broke out of this to reach its best level since January. If this breakout holds after NFP then a potential rise towards bigger resistance in the 0.6850-0.6900 range could get underway
- The line in the sand for me is at 0.6620, break below would be a bearish technical development

Trading Outlook:
- The combination of strong fundamentals and positive technical signals makes AUD/USD an attractive pair to trade on the long side, especially if US data continues to weaken.
- This pair is potentially a better long candidate compared to others like EUR/USD, which has election risks, or JPY/USD (I know, I know, it is USD/JPY), which faces potential government intervention.

By Fawad Razaqzada, market analyst at FOREX.com