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Aussie punches past 74, NFP looms for FX:AUDUSD by OANDA

The Australian dollar rally has continued on Friday, as the currency is higher for a fourth straight day. Currently, AUD/USD is trading at 0.7430, up 0.43% on the day.

The US dollar continues to falter, and the Aussie has taken full advantage. AUD/USD has gained 1.66% this week, after sharp gains of 2.42% a week earlier. Investors have given the Australian dollar a thumbs-up and soft Australian data on Friday hasn’t put a dent in the currency’s upward movement.

Australia Retail Sales faltered badly in July, with a reading of -2.7%.  The economy has been hit by the double blow of soft domestic activity and weak global demand, and there are concerns that the economy could slip into a recession. This could depend on how quickly Australia is able to contain the current wave of Covid, which has led to extensive lockdowns. Although the Covid numbers have been relatively low, the government has not hesitated to impose lockdowns, as most of the population has not been fully vaccinated.

It has been a rough week for the US dollar and the currency markets appear ready for a further dollar sell-off today. However, such a move is contingent on a soft reading from today’s nonfarm payrolls report. The consensus is around 750 thousand new jobs, and if the release is higher than expected, we could see a short squeeze on the US dollar . If the reading surprises to the downside, it could be a rough day for the greenback.

The upcoming NFP is critical as the Fed could decide on the timing of a taper based on the reading. The Fed has tied a taper to stronger employment data, and a better-than-expected read could renew speculation about an imminent taper. Conversely, a weak NFP reading will likely delay Fed plans to taper

There are resistance lines at 0.7455 and 0.7572.

0.7377 has switched to a support role as the AUD rally continues. Below, there is support at 0.7250

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