On its 4-hour time frame, AUD/USD has formed a double top formation as it failed to break past the 1.0500 major psychological resistance over the past few weeks. 

The neckline of the pattern is at the 1.0400 major psychological support, which could hold or break depending on the outcome of the NFP report.

Weaker U.S. jobs growth is eyed for March as the ADP non-farm employment change figure and Challenger job cuts data both posted bleak results. Sequestration efforts may have also started to kick in during the month, which might mean more government layoffs for the period. The NFP report is expected to show a 198K reading.

A stronger than expected figure could provide a boost for the U.S. dollar, which could trigger a downside break for AUD/USD. Take note that the pattern is 100 pips in height, which suggests that the breakdown could last until 1.0300.

On the other hand, a weak figure could lead to a dollar selloff, which might push AUD/USD back to the 1.0500 area or to the top of the longer-term range at 1.0600.

A 100-pip stop should provide enough leeway for the trade as volatility could spike during the actual release. If you’re not comfortable setting positions ahead of the event, wait for momentum to dictate price action before entering orders.

By Kate Curtis from Trader’s Way