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AUD/USD plunges to new YTD lows around 0.7005, bears target 0.7000

  • The AUD/USD declines sharply amid a not-so-bad US Nonfarm Payrolls report.
  • Downbear market sentiment hurts the prospect of risk-sensitive currencies in the FX market, the AUD weakens.
  • In the weekly chart, the AUD/USD broke under the 100 and the 200-week SMA’s, AUD bears eye 0.6776.

During the New York session, after a not-so-bad US Nonfarm payrolls report, the AUD/USD is plummeting to fresh year-to-date lows, trading at 0.7005, down 1.23% at the time of writing. As portrayed by US equity indices falling, market sentiment is downbeat after the US Bureau of Labor Statistics (BLS) unveiled that the Nonfarm Payrolls for November grew less than expected. However, the Unemployment Rate fell three tenths from 4.5% to 4.2%.

In tone with the risk-off mood, in the FX market, risk-sensitive currencies like the AUD, the NZD, and the GBP, are the main losers of the day, contrary to the greenback, which takes advantage of its safe-haven status.

Contradictory Nonfarm Payrolls report boosts the greenback, and the AUD/USD plunges to new YTD lows

In the meantime, an hour previous to the Wall Street open, the US Nonfarm payrolls for November showed that the US economy added 210K jobs to the economy, less than the 550K estimated. However, the positive from the jobs report was the Unemployment Rate, dropping from 4.5% to 4.2%, and it is crucial because that is the labor market gauge for the Federal Reserve.

The reaction to the headline was immediate, sending the AUD/USD upwards to 0.7090. Nevertheless, as investors dissected the NFP report, the AUD/USD upward move was faded, plummeting 80-pips, down to a new year-to-date low at 0.7012, then rebounding towards 0.7020s.

Amid those plays, the St. Louis Fed President James Bullard crossed the wires, where he said the US economy has recovered and is poised to grow. Noted that in the following meetings, the Fed would need to consider a faster bond taper reduction, citing that a 4.2% jobless rate “as a good case to remove Fed support.” Bullard also commented that the US central bank could consider increasing rates before finishing the bond taper.

AUD/USD Price Forecast: Technical outlook

The AUD/USD weekly chart depicts that as of the present week, the pair broke below the 100 and the 200-week simple moving averages (SMA’s), signaling a downward bias in the pair. Furthermore, as depicted by the chart, the Relative Strength Index (RSI), a momentum indicator, is at 33 with enough room to support another leg-down. 

Also, it is imperative to notice the central bank divergence between the Federal Reserve and the Reserve Bank of Australia, which has struggled to push back hiking rates until 2024. In contrast, the US central bank is looking to accelerate the QE’s reduction as inflation has overshot the bank’s target.

Therefore, USD bulls have the upper hand against the AUD, and as the pair is printing new year-to-date lows, the downward move would possibly extend further.

In that outcome, the first support level would be June 2020 swing lows at 0.6776, followed by the previous resistance level now turned support at 0.6570.


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