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Jun 03 - 09:55 PM

AUD/USD - COMMENT-AUD/USD Range Break May Be Beginning Of Pronounced Drop

By John Noonan  —  Jun 03 - 08:44 PM

The Australian dollar has finally broken below solid support after 16 straight days of closing on the 77-cents handle.
A weekly close below 0.7700 would pave the way to a move towards major support below 0.7550.

Strong U.S. economic data on Thursday sent Treasury yields higher and forced U.S. dollar bears to capitulate ahead of the always crucial monthly jobs report later on Friday nAQN048X6SnL2N2NK2B8nN9N2KB01BnL2N2NL1OJ.
If solid U.S. employment numbers continue to underpin Treasury yields, the short-USD conviction trade may further unravel.

The AUD has also benefited from surging metal prices since the start of 2021. Thursday's over 3% fall in London copper futures might be the start of an overdue correction lower in key commodities nL2N2NL0N4.

The AUD/USD technical outlook has turned bearish.
Analysts have been warning of a potential 'head and shoulders' pattern on the AUD/USD charts and the neckline of the formation around 0.7680 broke Thursday.

The 0.7660 close was also below the 61.8 Fibonacci retracement of the 0.7532-0.7891 move at 0.7669.
An obvious objective of an AUD/USD correction lower is 0.7530-35 where the 2021 low and the 200-day moving average converge.

A risk to the short AUD/USD trade is if U.S. non-farm payrolls disappoint elevated market expectations of a 650,000 jobs increase.
If the AUD/USD breaks above 0.7725 where the 10-and 100-DMAs converge, it would likely revert to sideways range trading.

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Source:
Refinitiv IFR Research/Market Commentary

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