The dollar battled in month-end trading last week and that kept a lid on AUD/USD, with sellers also holding at the July high around the figure level. The key level there will remain a focus this week, especially with the dollar side of the equation set to come under heavy scrutiny.

It’s all about jobs-related data in the US for broader markets to start September trading. And not only will that that heavily influence dollar sentiment, but also risk sentiment this week.

There’s not much in it today with the greenback trading more mixed. USD/JPY is up 0.4% to 146.70 but AUD/USD is up 0.3% to 0.6781 currently. The latter is still trading within a 30 pips range, so I wouldn’t be calling for a serious test of 0.6800 just yet.

Buyers will need some form of trigger to really get going, especially after being checked back last week.

As things stand, the key driver of the move higher in AUD/USD is still a case of a divergence between the RBA and Fed.

Last week, we got more stubborn inflation data from Australia here. However, that wasn’t quite enough to seal a breakout for buyers. It may be month-end or it may be sellers leaning on a key technical level and holding. But the fact is price action is still not signaling a break just yet.

And that brings us to this week now. The focus turns towards labour market data from the US. Traders are pricing in ~29% odds of a 50 bps rate cut later this month by the Fed. And for the remaining three meetings this year, there’s ~98 bps of rate cuts priced in.

Are we going to see more shaky data that will compel traders to try and force the Fed’s hand? Or is it all a hiccup and we’re going to have to run that back a little in the weeks ahead?

That will be key in determining what comes next for AUD/USD as well. It’s been a nice ride up since the double-bottom in early August. Now, we’re at a critical juncture and I wouldn’t be taking any bets until we get more clarity from US data at this stage.

This article was written by Justin Low at www.forexlive.com.