The U.S. dollar took a break from its onslaught against its major trading partners after the non-farm payroll report was released this morning. The July payroll advance came in at 209,000, well off the 298,000 reading for June and a decent miss from the 230,000 forecast. The unemployment rate also ticked hire to 6.2%, mainly because the participation rate climbed to 62.9%.
Another month of 200K+ job growth is likely to keep the Fed moving forward with its tapering plan and ultimately should be dollar positive. The weakness in the U.S. dollar today is mainly due in part to some profit taking as the recent gains have been slightly overextended and critical support/resistance levels are being respected.
Price action on the AUD/USD daily chart displays a potential bullish Gartley pattern that has formed just above the key .9270 area. This technical pattern shows critical support coming both from the X to A 78.6% Fibonacci retracement level and the B to C 141.4% Fibonacci expansion level. Next week we will see a few key Australian data releases and the RBA monetary policy decision add to the recent volatility. If price is able to rally towards the 50-day SMA (which currently trades around .9367), we will look to fade that rally. This short trade may be invalidated only if we see a daily close above the psychological .9400 level. Key support will come from the potential double-bottom zone of .9200. .
The trade: Sell AUD/USD at .9360 with a stop loss at .9405 and a take profit at .9225. The Risk/Reward Ratio is 1:3
Edward J. Moya
WorldWideMarkets Online Trading