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AUD/USD: Buyers stay in near-term control after positive labour market data

Price stalls around swing region resistance between 0.7260-75


The solid labour market isn’t anything new for the aussie but the continued strong showing is helping to give buyers added fuel to stay in the game. The RBA has been relying on spinning its statement to highlight the solid labour market to distract from the fact that they are still nowhere near to be able to hike rates just yet so this isn’t really a game changer for the aussie in my view.
However, it doesn’t mean that price is wrong to jump higher for the time being. Buyers are keeping with the near-term bullish tones after holding off a defense at the 200-hour MA (blue line) earlier in the day. And the move higher now sees price trade between the swing region resistance at 0.7260-75.

The real key for buyers is to hold a break back above the 100-day MA (red line) @ 0.7257 and then work towards breaking the September high @ 0.7315. But now they also have to navigate through last week’s high @ 0.7302 first. Those will be key levels to break above in order to justify that the bullish run will continue.
Although I’ve constantly highlighted that monetary policy divergence will help lend a hand for the bearish rhetoric in AUD/USD, there is actually something aside from stretched short positioning that could help the aussie regain its feet.

It’s something that traders very little talk about and that is terms of trade. In 2018, there’s been a steady divergence between Australia’s healthily growing terms of trade and the aussie’s performance against the dollar.
While you can attribute that to the dollar’s strength on some part, the fact that the aussie is the worst performing major currency of the year so far doesn’t do this correlation justice. I still believe monetary policy divergence plays a bigger role as real money flows are more affected by such a factor. However, with aussie short positions still looking relatively stretched, some added positive reinforcement won’t do it any harm.
As for AUD/USD itself, unless buyers holds a break above 0.7315, it’s still hard to see price run further to the upside for the time being. That is the line in the sand for the pair right now.

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