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AUD/USD rate eyes September low with US NFP report on tap

The AUD/USD exchange rate may fail to defend the September low (0.6363) as the US Non-Farm Payrolls (NFP) report is anticipated to show a further improvement in the labor market.

Source: Bloomberg

AUD/USD appears to be tracking the weakness across commodity bloc currencies as it depreciates for the third consecutive day, and the exchange rate may depreciate over the remainder of the week as the NFP report is anticipated to show the US economy adding 250K jobs in September.

Source: DailyFX

Evidence of a resilient labor market may generate a bullish reaction in the Greenback as it allows the Federal Reserve to pursue a restrictive policy, and the central bank may retain its approach in combating inflation as the Summary of Economic Projections (SEP) reflect a steeper path for US interest rates.

As a result, speculation for another 75bp Fed rate hike may drag on AUD/USD as the RBA softens its approach in normalizing monetary policy, and it remains to be seen if Governor Philip Lowe and Co. will gradually adjust the forward guidance over the coming months as the central bank acknowledges that “the cash rate has been increased substantially in a short period of time.”

In turn, AUD/USD may face headwinds ahead of the next RBA meeting on November 1 as the central bank seems to be nearing the end of its hiking cycle, but a further decline in the exchange rate may fuel the tilt in retail sentiment like the behavior seen earlier this year.

Source: DailyFX

The IG Client Sentiment report shows 81.57% of traders are currently net-long AUD/USD, with the ratio of traders long to short standing at 4.42 to 1.

The number of traders net-long is 6.34% higher than yesterday and 12.18% higher from last week, while the number of traders net-short is 22.91% lower than yesterday and 25.77% lower from last week. The rise in net-long in net-long interest has fueled the crowding behavior as 76.86% of traders were net-long AUD/USD earlier this week, while the decline in net-short position comes as the exchange rate trades to a fresh weekly low (0.6389).

With that said, the US NFP report may fuel the recent weakness in AUD/USD should the update fuel speculation for another 75bp Fed rate hike, and the monthly opening range may warn of a further decline in the exchange rate if it fails to defend the September low (0.6363).

AUD/USD rate daily chart

Source: TradingView

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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