Yesterday’s attempt by the Aussie dollar to break out from the current congestion with a move higher, was promptly snuffed out today, as poor employment data shocked the markets, sending the currency lower against the US dollar. The numbers which triggered this sharp fall were truly awful, with the headline unemployment rate rising to 6.4% against a forecast of 6.0% and which, until last night’s figures, had appeared to have topped out at 6.0% with April, May and June having reported a rate of 5.8%. However last month’s 6.0% now appears to be a further step higher in the trend, with 6.4%  adding further gloom to the Australian economy.

The change in employment simply added a further nail in the coffin, coming it at -0.3K against a forecast of +13.5K and a previous of +14.9K – gloomy numbers indeed, with the currency moving sharply lower, and now looking to close with a wide spread down candle on the daily chart for the September contract.

From a technical perspective the two key levels of support and resistance are now clearly defined on the chart. The red dotted line to the upside sits in the 0.9320, which has been tested three times this week, and held on each occasion. The question now is whether the potential support platform in place at the 0.9250 level, and now being tested, will in fact hold.

Should this level be breached, then expect to see a deeper move lower for the pair, with the next logical level being the minor support region in the 0.9200 area. From there, it’s a short drop to the 0.9120 price level in the medium term. This weakness was also signalled earlier last week with the rally higher accompanied by high volume on the first candle, which then closed with a deep upper wick, followed by the subsequent candle, which moved modestly higher but on low volume. With the double top now in place, the outlook for the Aussie dollar looks increasingly bearish, and any weak data from China may be the catalyst for a more sustained period of bearish sentiment for the currency. Indeed on the currency strength indicator to the left of the chart, the Aussie Dollar ( the blue line ) has some way to go before reaching an oversold position.

Editor’s Note: Equity investors/traders can use the Currency Shares Australian Dollar Trust (FXA, quote) ETF to take positions in the Aussie dollar without a FOREX account.  The ETF looks to track the price of the Aussie dollar (AUDUSD), minus ETF fee. The fund seeks to reflect the price of the Aussie dollar (AUDUSD) with the shares representing a cost-effective investment relative to investing in the FOREX market.

Anna Coulling is a trader with over 16 years’ experience and founder of AnnaCoulling.com