While the AUDUSD currency pair suffered from soft Chinese data in the Wednesday session, the next day proved quite the opposite, as a stronger-than-expected factory report from China boosted the Australian Dollar, bringing the bulls back into the equation. 

China’s Caixin Manufacturing PMI unexpectedly expanded, coming in at 50.9, versus the expectations of an unchanged number at 49.5. The Australian Dollar benefitted from the expansion, while the US dollar faced its own battles. Fed officials signalled that the central bank might avoid another interest rate hike this month, forcing the market to reprice their interest rate expectations. However, with the passing of the deal to raise the US debt ceiling, the Greenback was able to resist further weakening. 

Technical 

A descending wedge has formed on the 4H chart, where the bulls have broken through the daily pivot resistance at $0.6499. The wedge resistance is holding firm, but with the pivot point now acting as support, the bulls could be enticed to break to the upside. 

A bullish breakout from the wedge could bring resistance at $0.6541 (R1) and $0.6580 (R2) into play. However, the Non-Farm Payroll data on Friday could still throw a spanner in the works. A soft print, however, could be the triggering event for a leg up to higher resistance at $0.6604 in the longer term. 

Alternatively, a strong print could cause hesitation in the market’s repricing, which could see a continuation of trading within the wedge. Support is established at $0.6460 (S1) before the wedge support stands in the way of the bears breaking down toward $0.6419 (S2). 

Summary 

With the US debt ceiling agreement passed and the Federal Reserve signalling a potential pause in this month’s monetary policy meeting, a return to risk-on could entice a bullish breakout of the descending wedge toward $0.6541 if the NFP report supports the fundamentals. 

Sources: Koyfin, Tradingview