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AUD/USD Breaks Key Support as USD Index Hits Four-Week High
Traders' Opinions
Summary:
The AUD/USD pair falls to near 0.6676 as investors favor the US Dollar ahead of December’s Nonfarm Payrolls data, while soft Australian inflation data undermines RBA rate hike expectations.
Sell
TradingAUDUSD
EXP
0.66800
Entry Price
0.66400
TP
0.67200
SL
0.67123 +0.00346 +0.52%
0
Point
Flat
0.66400
TP
CLOSING
0.66800
Entry Price
0.67200
SL
The Australian Dollar (AUD) continued to face selling pressure on Friday, marking its third consecutive day of losses against the US Dollar (USD). During the late European trading session, the AUD/USD pair slipped to 0.6676, reflecting a market increasingly cautious ahead of the United States’ December Nonfarm Payrolls (NFP) report, scheduled for release at 13:30 GMT.
The US Dollar has demonstrated notable resilience in recent sessions, with the US Dollar Index (DXY)—which tracks the Greenback against six major currencies—hovering around 99.10, the highest level in roughly four weeks. Market participants are positioning ahead of the NFP data, which will provide fresh insights into the Federal Reserve’s (Fed) policy trajectory. Recent commentary from Fed officials has underscored a heightened sensitivity to the labor market, with policymakers expressing concern that weakening employment conditions may outweigh inflation risks, even as consumer prices remain above the central bank’s 2% target.
Economists forecast that US employers added 60,000 new jobs in December, slightly below November’s 64,000. The unemployment rate is expected to have fallen to 4.5% from 4.6%, signaling a modest tightening of the labor market. Meanwhile, Average Hourly Earnings—a key gauge of wage inflation—is anticipated to have accelerated to 3.6% on an annualized basis, up from 3.5% in November, with month-on-month growth projected at 0.3%, compared with the previous reading of 0.1%. Should these figures surprise to the upside, the USD may see additional support, reinforcing the AUD/USD’s downtrend.
Compounding the Greenback’s strength is the softening outlook for the Australian Dollar. The antipodean currency has come under pressure following November’s Consumer Price Index (CPI) report, which revealed a year-on-year inflation reading of 3.4%, below the 3.7% forecast and down from October’s 3.8%. This weaker-than-expected inflation print has prompted investors to scale back expectations for Reserve Bank of Australia (RBA) hawkishness at the February policy meeting. According to Reuters, the probability of a rate hike by the RBA in February now stands at just 24%, underscoring diminished confidence in further tightening.
Technical Analysis
From a technical perspective, the AUD/USD’s recent decline represents a decisive bearish breakout below the lower boundary of its ascending channel, signaling a potential shift in market sentiment. The bullish impulse that commenced on 5 January, previously marked by a short-term upward trend, has been fully neutralized by the current selling wave. Price action now suggests that sellers are firmly in control, and any attempt by bulls to push the pair back into the channel may encounter resistance around 0.6720, the level from which the sharp sell-off began on 8 January.
This technical configuration highlights the dominance of bearish momentum, with key support levels near 0.6660 and 0.6640 likely to be tested if selling pressure persists. Traders may also watch closely for a reaction to the US NFP report, which has the potential to either reinforce the USD’s strength or provide temporary relief for the AUD.
TRADE RECOMMENDATION
SELL AUDUSD
ENTRY PRICE: 0.6680
STOP LOSS: 0.6720
TAKE PROFIT: 0.6640
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