The AUD/USD is holding steady at around 0.6660 after a strong three-week rally came to an end due to disappointing Australian job numbers. The Australian Dollar peaked at 0.6686, but now attention turns to the US Nonfarm Payrolls data to gauge the Federal Reserve’s future monetary policy. Australia’s job market showed a loss of 21.3K jobs in November, while a gain of 20K was expected. On the other hand, the US Dollar Index is close to its seven-week low of 98.13, following three recent meetings of the Fed where rates were cut by 100 basis points, now resting between 3.50% and 3.75%.

Technical Aspects Of AUD/USD

Technically, AUD/USD is stable near the 20-Exponential Moving Average, suggesting a bullish trend with a 14-day Relative Strength Index (RSI) of 67. Although momentum remains strong, there are indicators of potential overbought conditions, which could lead to consolidation. Resistance is seen at 0.6707, while support is around 0.6551. The US Dollar is the most traded currency worldwide, making up over 88% of forex transactions. Its value is greatly influenced by the Federal Reserve’s monetary policy, with interest rate changes having a significant impact. Quantitative easing generally weakens the dollar, while tightening tends to support it. The AUD/USD pair is pausing at 0.6660 after its recent climb. This slowdown follows weak Australian employment figures that showed an unexpected drop in jobs, shifting focus to the upcoming US Nonfarm Payrolls (NFP) data for potential direction. The Federal Reserve has been reducing interest rates this year, cutting them by one full percentage point in three meetings to address a softening job market. With the latest Consumer Price Index revealing core inflation has dropped to 2.8% year-over-year, the Fed is focused on employment trends. The market eagerly awaits Tuesday’s NFP data to see if job market weaknesses persist.

Market Reactions And Strategies

For traders in derivatives, this situation indicates a market poised for movement. If the upcoming US jobs data is worse than expected, it will likely confirm the Fed’s trend of rate cuts, weakening the dollar and pushing AUD/USD toward the resistance at 0.6707. In this case, buying call options could be a smart way to take advantage of the possible upward movement. On the flip side, a surprisingly strong NFP report could lead the market to reassess the speed of future Fed rate cuts, strengthening the dollar. This scenario could drive AUD/USD lower, potentially breaking through current support levels. Traders anticipating this outcome might consider buying put options to profit from a possible decline toward the 0.6550 zone. With this uncertainty, implied volatility in the currency markets has been decreasing ahead of the data release. The CME’s AUD/USD Volatility Index (AUDVOL) just hit a multi-week low of 8.5, making options strategies that benefit from significant price moves, like straddles, more affordable. This creates a trading opportunity for a breakout in either direction triggered by the NFP data. A critical technical level to monitor is the 20-day moving average, currently around 0.6588. If the AUD/USD breaks decisively below this level after the US jobs report, it would indicate a downward momentum shift. As long as it stays above this level, the overall trend remains upward, favoring bullish strategies. Create your live VT Markets account and start trading now.

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