Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6540.
• Add a stop-loss at 0.6650.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 0.6585 and a take-profit at 0.6650.
• Add a stop-loss at 0.6500.

(Click on image to enlarge)

The AUD/USD pair suffered a harsh reversal as the US dollar staged a strong comeback after the strong nonfarm payrolls (NFP) data. It tumbled to the psychological level of 0.6580, its lowest swing since May 9th. It has crashed by over 2% from its highest point this year.
 

Fed rate cut hopes fade

The AUD/USD pair crashed hard after the US published strong jobs numbers. According to the Bureau of Labor Statistics (BLS), the economy added over 242k jobs in May as the unemployment rate rose to 4.0%.

Wages continued growing, which could put pressure on inflation in the country. As a result, there are concerns that the Fed will not be in a hurry to slash interest rates as analysts at JPMorgan and Citigroup were expecting.

In the aftermath of the jobs report, the US dollar index jumped to almost $105 while equities dropped. The US bond yields also continued rising, which is a sign that the Fed will not cut interest rates in July.

The next important catalyst for the AUD/USD pair will be the upcoming Federal Reserve decision set for Wednesday. Economists polled by Reuters expect that the Fed will leave interest rates unchanged between 5.25% and 5.50%.

The key mover will be the Fed’s statement on when to expect interest rate cuts. In recent statements, some Fed officials have urged caution about this. Raphael Bostic of Atlanta Fed has hinted that the Fed will start cutting rates in the fourth quarter.

The AUD/USD pair also dived even after the strong economic data from China. A report by the country’s statistics agency showed that the country’s exports rose by 7.6% in May while imports jumped to 1.8%. This increase led to its trade surplus soaring to over $82.6 billion. Chinese economic numbers are important because it is Australia’s biggest trade partner.
 

AUD/USD technical analysis

The AUD/USD pair has continued dropping sharply in the past few days. It crashed below the crucial support at 0.6590, its lowest swing on May 30th and 24th. The pair has also plunged below the 50-period Exponential Moving Average (EMA) and is now hovering at the 38.2% Fibonacci Retracement point.

It has also moved below the Ichimoku Cloud indicator while the Relative Strength Index (RSI) has moved to the oversold level. Therefore, the pair will likely continue falling as sellers target the key support at 0.6540, the 50% retracement point.

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