AUDUSD has been creating lower highs and making higher lows, forming a symmetrical triangle forex chart pattern on its 1-hour time frame. 

At the moment, the pair is testing the triangle support near the .7900 major psychological level and may be due for a breakdown.

Stocahstic is moving down, confirming that sellers are stronger than buyers for now. Increased bearish pressure could lead to a downside break of support and possibly 300 pips in losses for the pair, which is roughly the same height as the triangle pattern. On the other hand, a bounce off the triangle support might lead to another test of the resistance around the .7950 minor psychological level.

The path of least resistance is to the downside, as traders are renewing their long dollar biases after the release of the US NFP report last Friday. The actual reading came in line with expectations of a 223K gain while the jobless rate improved from 5.5% to 5.4% – its lowest level since May 2008.

Meanwhile, the Australian economy recently printed a bleak jobs report, showing a surprise 2.9K drop in hiring versus the estimated 4.5K gain. This brought the country’s jobless rate up from 6.1% to 6.2%, reminding traders that the RBA just cut interest rates and might need to do so again.

While the Fed might not be able to hike interest rates next month, they are likely to retain their rate hike bias for this year. Underlying labor indicators such as the participation rate and the underemployment rate have shown sustained improvements, which suggests that the economy is back on track to recovery.

In addition, the recent interest rate cut from China over the weekend confirms that a sharper slowdown is eyed for the world’s second largest economy and Australia’s number one trade partner. This could weigh on risk appetite and drag the higher-yielding commodity currencies lower.

By Kate Curtis from Trader’s Way