AUD/USD forms inverse H&S pattern ahead of Australia jobs data
- The AUD/USD has formed an inverse head and shoulders pattern.
- It moved above the neckline of this pattern because of the weaker greenback.
- The pair will next react to the Australian jobs numbers.
The AUD/USD price surged to the highest level since March 23, helped by the weaker US dollar and higher commodity prices. Forex tradersare now eying the latest Australian jobs data scheduled for Thursday.
Higher commodity prices
Australia is highly endowed with vast natural resources like coal and iron ore. Therefore, the Australian dollar is widely considered as a commodity currency since it does well when prices rise.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
Most commodities like gold and copper have bounced back today as the market reflect on the US inflation numbers. The Bloomberg Commodity Index (BCOM) has jumped by 0.60% today.
While US inflation rose in March, the market believes that the jump will be temporary. As a result, the Fed will likely maintain its low interest rates for a while. In its recent statements, the Fed has signaled that it will hike in 2024.
Low interest rates in the US are typically bad for the US dollar and good for commodities. Indeed, the dollar index has dropped to the lowest level since March this year.
The AUD/USD is also rising after the recent strong numbers from Australia. In the past few days, data revealed that the consumer and business confidence has rebounded as the country eyes eventual reopening. It is already delivering vaccines and the government expects to ramp-up the process. Data from China, Australia’s biggest economy, also revealed that the economy is rebounding.
Looking ahead, the AUD/USD will react to the latest Australian jobs numbers. Economists polled by Reuters expect the data to show that the overall unemployment rate fell to 5.7% in March from 5.8% in April. They also expect the participation rate rose to 66.3% from 66.4%. This number shows the percentage of working age people who are active in the labour market. Further, they expect the economy added more than 35,000 new jobs.
AUD/USD technical outlook
The four-hour chart shows that the AUD/USD pair broke out above the important resistance level at 0.7675. This price is the neckline of the inverted head and shoulders pattern. In technical analysis, this is usually a bullish signal. It has also moved above the 25-day moving average while the Relative Strength Index (RSI) has moved above the overbought level. Therefore, the pair will likely break out higher as bulls target the important resistance at 0.7750.