The recent data on the Australian labor market shows that the unemployment rate is currently at its highest since November 2021. The rise in unemployment is attributed to an increase in the labor supply, which may not be as concerning as a rise in unemployment due to job losses. According to AMP’s Head of Investment Strategy and Chief Economist Shane Oliver, this rise in unemployment is not likely to rush the Reserve Bank of Australia (RBA) into rate cuts. Despite this, it does indicate a cooling in the labor market, with predictions of the first rate cut by February 2025.
Investors are closely monitoring speeches from FOMC voting members Christopher Waller and Raphael Bostic to gain insights into the labor market and the Fed rate path. Speculation about a 50-basis point rate cut in September has waned, and support for such a cut could lead to an interest rate differential between Australia and the US, potentially driving the AUD/USD pair above $0.70. Chief Global Economist Parker Ross highlighted concerns about the Fed’s ability to manage the labor market despite the current economic challenges.
Short-term trends for the AUD/USD pair will be influenced by factors such as Australian inflation figures, US jobless claims, and the US Personal Income and Outlays Report. Any deviation from expectations in these reports could lead to shifts in market sentiment. While softer-than-expected Australian inflation may dampen expectations of an RBA rate hike, negative economic indicators from the US could fuel speculation of a 50-basis point Fed rate hike, potentially pushing the AUD/USD towards $0.70. It is essential for investors to stay informed about economic data and central bank commentary to make informed trading decisions.
From a technical perspective, the AUD/USD pair is currently trading above both the 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bullish trend. A breakout above the resistance level of $0.67967 could trigger further upward momentum towards $0.68500 and eventually $0.68996. On the other hand, a decline below the support level of $0.67500 might lead to a bearish trend towards $0.67003, with potential buying pressure at the top trend line. The 50-day EMA aligns with the top trend line, suggesting a significant level of support.
The labor market trends in Australia, combined with the economic indicators and central bank actions, are key drivers of the AUD/USD pair’s movements. It is crucial for traders to stay informed about these factors and adjust their strategies accordingly to navigate the forex markets successfully.
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