Currency pair of the week: AUD/USD testing resistance ahead of key data releases
Matt Weller, CFA, CMT August 31, 2021 12:25 AM
With major economic data releases out of both the US and Australia, FX traders will be keying in on AUD/USD as arguably the most important currency pair to watch this week...
As my colleague Tony Sycamore noted earlier today, Australian traders will be closely monitoring the release of the country’s Q2 GDP report. Although the data precedes the ongoing lockdowns in Sydney and Victoria, it “…is expected to garner serious media attention because a heavy contraction in GDP in Q3 is already guaranteed due to lockdowns.” Later in the week, traders will refocus their attention on the country’s July retail sales release, which is expected to decline -1.9% m/m.
Meanwhile, on the other side of the Atlantic, there is also plenty of US data scheduled for release. The highlight will be Friday’s Non-Farm Payrolls (NFP) report, though the US PMI surveys and ADP employment report will also merit close attention, especially in the wake of last week’s cautious economic assessment by Fed Chairman Jerome Powell at the Jackson Hole Economic Symposium.
With major economic data releases out of both the US and Australia, FX traders will be keying in on AUD/USD as arguably the most important currency pair to watch this week. From a technical perspective, the pair rallied back from year-to-date lows near 0.7100 last week all the way up to trade near 0.7300 as of writing.
Notably, the 0.7325 level was a key area of support through late July and early August, and that previous level of support is now likely to become a future area of resistance. Meanwhile, the 21-day EMA (light blue) has consistently capped short-term rallies in AUD/USD since mid-June, further strengthening the 0.7300-25 zone of resistance:
Source: StoneX, TradingView
With rates still holding below 0.7325 as we go to press, the current bias in AUD/USD remains to the downside despite last week’s sharp rally. If rates show signs of rolling over this week, especially if supported by weak Australian or strong US data, bears may look to enter AUD/USD shorts targeting a retracement of last week’s rally toward 0.7200 or 0.7100. On the other hand, a confirmed breakout above 0.7325 would flip the near-term bias in favor of the bulls for a continuation toward 0.7400 next.
How to trade with City Index
You can trade easily trade with City Index by using these four easy steps:
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.