Bullish MACD Convergence Fully Formed; Breakthrough on the Horizon

Summary:

The US dollar's further rise led AUDUSD to give up part of its intraday gains. Australia's surprisingly strong labor market data may force the Reserve Bank of Australia (RBA) to maintain its hawkish rate stance.

BUY AUDUSD

Close Time

CLOSED

0.67050

Entry Price

0.69010

0.66000

0.71147 +0.00099 +0.14%

105.0

Pips

Loss

0.66000

0.65996

Exit Price

0.67050

Entry Price

0.69010

Fundamentals

Boosted by Australia's optimistic September employment data, AUDUSD briefly rose to 0.6700 during the Asian session before retreating some of the intraday gains due to the US dollar's continued strength.

The Australian Bureau of Statistics reported that employment increased by 64,100 in September compared to August, far exceeding market expectations of a 25,000 rise, with most of the gains coming from full-time jobs. The unemployment rate remained steady at a revised 4.1%, while the participation rate edged up to a record high of 67.2%.

The strong employment data crushed hopes for a rate cut by the RBA this year (and support for high interest rates), pushing AUDUSD higher. However, despite the Australian dollar's outperformance relative to other major currencies, its short-term upside is likely to remain limited as the US dollar continues to rise.

Overall, Australia's robust labor market in September makes it less likely that the RBA will opt for rate cuts in the near term. Additionally, RBA Deputy Governor Sarah Hunter emphasized the central bank's commitment to controlling inflation, noting that inflation remains a concern amid rising prices. We believe that the RBA is unlikely to cut rates at least until the first half of next year given the tight labor market, which is bullish for the AUD.

Bullish MACD Convergence Fully Formed; Breakthrough on the Horizon_1

Technical Analysis

AUDUSD is showing signs of intraday recovery, but the downside pressure is expected to continue as long as the 0.6758 resistance remains intact. A break below 0.6623 would resume the structural decline from the short-term top at 0.6942 down to 0.6623. A decisive breakthrough of this level would pave the way for a return to the 0.6348 support.

Nonetheless, with the 4-hour MACD showing bullish convergence and the price sitting in a demand zone, a solid breakout above the key resistance at 0.6758 would shift the bias back to the upside, leading to a retest of 0.6941.

Overall, similar to other major non-US currencies, the asset has experienced excessive selling, indicating that a potential rebound may be imminent. The recommended strategy remains to buy the dips.

Trading Recommendations

Trading Direction: Buy

Entry Price: 0.6668

Target Price: 0.6901

Stop Loss: 0.6600

Valid Until: Nov 1, 2024 23:55:00

Support: 0.6658, 0.6623, 0.6560

Resistance: 0.6710, 0.6758, 0.6810

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