When something cannot go up on good news...
Odds are it's going to be headed back down. But for now, I would expect AUD/USD to chop sideways ahead of tomorrow's US jobs report release. Risk sentiment remains mixed/muted so far today and unless Trump announces a breakthrough summit/deal later, things are likely to stay the course.
And that means the upside in AUD/USD will remain limited by the resistance region near 0.7130 as well as the 200-day moving average at 0.7147. Unless price breaks above these levels, it's hard to justify a further extension of a move higher in the pair.
So, what should we expect next?
Any further downside move isn't a guarantee as well considering it will depend on the nature of tomorrow's US jobs report. But we can use technical levels as a guide for whether or not there is a bias leaning towards that.
Key support in the hourly moving averages is seen close to the 0.7100 handle where the 38.2 retracement level also lies, so that should help provide an area for buyers to lean on in the meantime. Another thing to consider is that tomorrow there will be large expiries rolling off at the figure level (A$1.6 billion). That should be a consideration for price action to stay supported above/close to that for the time being.
As we look to wrap up the week, the key driver of the pair will ultimately be how risk sentiment performs over the next two days. Any upside/downside extensions can be defined and limited by the levels pointed out above.
But in the bigger picture and longer-term, AUD/USD will remain a yields story as the RBA looks to shift towards a more dovish stance in the coming months.
