The AUD/USD pair is gradually recovering after an impulse decline to multi-month lows. Last Friday, the indicated instrument reached the level of 0.7478, indicating an annual low. The last time the pair was in this price area was in December 2020, as part of an uptrend from the 70th figure.
Despite the strong downward momentum, the bears of this pair failed to further decline this week – sellers were disappointed again by the vulnerability of the US dollar. Jerome Powell's disastrous speech in Congress and weak macroeconomic data allowed AUD/USD traders to reverse the pair, raising it by 100 points. It should also be noted that buyers of the Australian dollar can rely not only on the vulnerability of the US dollar since it has its arguments for growth. However, it remains in the shadow of its influential counterpart.
It can be recalled that the growth of the Australian labor market was released the day after the results of the Fed's June meeting were announced. The release exceeded all experts' expectations – the main components came out in the "green zone", reflecting the recovery of the Australian economy. In particular, the unemployment rate in the country sharply declined to 5.1%, although the preliminary forecasts said that it should have remained at 6.5%. This indicator shows a downward trend for the seventh month in a row. The last time unemployment was at this level was in February last year, even before the coronavirus crisis. It is also necessary to note the positive dynamics of the increase in the number of employees. The overall indicator in May turned out to be better than forecasts, reaching 115 thousand (with a growth forecast of 30 thousand). Moreover, the structure of this indicator suggests that the overall growth was due to full employment, while part-time employment showed a quite weak result (ratio of 97.5/17.5).
The AUD/USD traders ignored last week's publication as they were under the influence of the US currency, which completely controlled the situation for the pair. But now that the hype around the US dollar has noticeably fallen, the Australian Nonfarm is providing background support for the Australian dollar. It is worth noting that next month, the Reserve Bank will consider whether to keep the yield of 3-year bonds maturing in April 2024 as a target or switch to securities with a deadline of November 24. Most importantly, the RBA will consider the issue of further bond purchases at the July meeting. Before this, every macroeconomic report plays an important role for the AUD, so there is no doubt that the market only temporarily ignored the Australian Nonfarm.
In turn, the US currency is under background pressure from several fundamental factors. First, Fed Chairman Jerome Powell leveled the general optimism of dollar bulls regarding the "hawkish" intentions of the Fed during his speech to Congress. He said that the regulator will not force to raise interest rates, looking only at inflation. At the same time, he assured congressmen that the Fed will not rush to tighten the parameters of monetary policy. As for the prospects of the incentive program, there are more questions than answers: the head of the US regulator limited himself to general phrases, the essence of which comes down to a wait-and-see position.
The American macroeconomic reports also put additional pressure on the US dollar. In particular, the indicator of home sales in the US primary market showed negative dynamics, falling by almost 6%. The US index of business activity in the services sector was also disappointing. The indicator interrupted its consecutive 5-month growth and entered the "red zone", not meeting the forecast values. Although these are minor data, they also contributed to the strengthening of the bullish mood. AUD/USD buyers managed to test the level of 0.76 but failed to consolidate in this area, declining by 40 points.
Given the position of Jerome Powell during his speech in Congress, it can be assumed that the Australian dollar will make another attempt to reach the 76th mark in the medium term. The commodity market also provides background support for this currency. In particular, the price of iron ore reached $ 214 per ton (for comparison, this figure was at the level of $ 170 at the beginning of March, and at the level of $ 100 a year ago). Experts said that this is primarily due to the growth of production and construction in China. An additional factor was the concerns of market participants regarding limited global iron ore supplies. The stocks of raw material in the ports of China reached a four-month low in June, while weekly ore supplies significantly fell.
From the point of view of technical analysis, the first resistance level (upward target) of the AUD/USD pair is at 0.7600 (Tenkan-sen line). In turn, the main support level is slightly higher – at 0.7650 (middle line of the Bollinger Bands on D1). One can consider longs from the current positions or with downward pullbacks to the support level of 0.7540 (middle line of the Bollinger Bands on the four-hour chart that coincides with the Kijun-sen line).
