AUD/USD Faces Strong Jobs Report Test Amid Balanced Rate Expectations

The Australian dollar has extended its rally to a seventh consecutive week, despite momentum remaining far from convincing. The Reserve Bank of Australia (RBA) and Federal Reserve rate expectations are finely balanced, leaving Thursday's Australian employment report as the main domestic event.

With yield differentials and options sentiment supporting the Aussie but the US dollar holding above support, a stronger catalyst is required to drive AUD/USD sustainably above 71c. The RBA retained its hawkish bias, although a rate hike seems unlikely for now.

A strong jobs report is needed to shift AUD/USD, as a hike is more likely than a cut and could bolster bets for a December hike. Implied volatility has fallen to its lowest level this year, according to the options market, which suggests that traders currently estimate a 50-pip move either side of current levels by Friday.