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AUD/USD drops to critical support ahead of Australian jobs data

Despite a recent breakdown and general weakness in the US dollar this week, the Australian dollar has managed to remain even weaker, which has prompted a major breakdown for the AUD/USD currency pair.

Contributing to the Australian dollar’s weakness has been a generally dovish Reserve Bank of Australia, which kept interest rates unchanged last week, as well as relatively soft economic data emerging from Australia of late. This lackluster data has included both disappointing retail sales numbers as well as unexpectedly low inflation readings. The RBA has recently continued to harbor concerns over weak inflation, low wage growth, and the relative strength of the Australian dollar, which have combined to preclude the central bank from raising the cash rate from its current record low of 1.50%.

Up next, on Thursday in Australia, will be the critical employment data release for October. Australia is expected to have added 17.8K jobs in October, and its unemployment rate is expected to have remained steady at 5.5%.

As noted, in the run-up to this employment data AUD/USD has broken down below some key support factors, even as the US dollar has been beaten down this week by concerns over US fiscal policy and tax reform. Earlier this week, AUD/USD broke down below a bearish inverted pennant pattern that formed after price previously dropped below key support around 0.7750 in late October. After breaking the pennant pattern this week, the currency pair went on to break below 0.7600-area support on Wednesday, and has currently reached down to a major uptrend line extending back to the 0.7150-area lows of last December. With any sustained breakdown below this support trend line, the next immediate downside target on further AUD/USD weakness is around the critical 0.7500 support area. On any extended break below 0.7500, the next major downside target resides around key 0.7300 support.

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