AUD to USD Forecast: Australian Full Employment Tumbled 106.6k in December

Highlights

• The AUD/USD fell by 0.49% on Wednesday, ending the session at $0.65515.
• On Thursday, full-time employment fell sharply in December, while the unemployment rate remained at 3.9%.
• US jobless claims and Fed speakers warrant investor attention later in the session.

Wednesday Overview of the AUD/USD

The AUD/USD declined by 0.49% on Wednesday. Following a 1.15% slide on Tuesday, the Australian dollar ended the session at $0.65515. The Australian dollar rose to a high of $0.65946 before falling to a low of $0.65248.

Australian Labor Market in the Spotlight

On Thursday, Australian labor market numbers garnered investor interest. Softer labor market conditions could impact wage growth and reduce disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation. The RBA could respond by considering interest rate cuts.

In December, the Australian unemployment rate remained unchanged at 3.9%. Economists forecast an unemployment rate of 3.9%. However, full-time employment tumbled by 106.6k after rising by 57k in November. Employment declined by 65.1k versus a 61.5k rise in November. Economists forecast a 17.5k increase in employment.

According to the ABS,

• The participation rate fell from 67.3% to 66.8%, with the employment-to-population ratio down from 64.7% to 64.2%.
• In December, the underemployment rate remained unchanged at 6.5%.

US Economic Calendar: Jobless Claims and Fed Speakers

On Thursday, the US labor market will be in the spotlight. Economists forecast US initial jobless claims to increase from 202k to 207k in the week ending January 13. Weaker labor market conditions could affect wage growth and disposable income. Downward trends in disposable income could reduce consumer spending and dampen demand-driven inflation.

A softer inflation outlook could allow the Fed to begin cutting interest rates. However, initial jobless claims would need to spike to shift positive sentiment toward the US labor market.

Other economic data includes the Philly Fed Manufacturing Index and housing sector-related numbers. Barring a marked decline in the Philly Fed Index, the jobless claims will be the focal point.

Beyond the numbers, FOMC member commentary also needs consideration. FOMC member Raphael Bostic is on the calendar to speak.

Short-Term Forecast

Near-term trends for the AUD/USD hinge on US labor market data and Fed chatter. Upbeat US labor market data and less dovish Fed comments could further reduce bets on a March Fed rate cut.

AUD/USD Price Action

Daily Chart

The AUD/USD remained below the 50-day and 200-day EMAs, affirming bearish price signals.

An AUD/USD breakout from the 200-day EMA and $0.66162 resistance level would bring the 50-day EMA and the $0.66500 handle into play.

On Thursday, Australian and US labor market data, China, and the Fed warrant investor attention.

However, a fall through the $0.65000 handle would support a drop to the trend line and $0.64900 support level. Buying pressure could intensify at $0.64900. The trend line is confluent with the $0.64900 support level.

A 14-period Daily RSI reading of 32.86 suggests an AUD/USD break below the $0.65 handle before entering oversold territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD held below the 50-day and 200-day EMAs, reaffirming bearish near-term price signals. Significantly, the 50-day EMA crossed through the 200-day EMA on Wednesday. The bearish cross confirmed the bearish price trends.

An AUD/USD return to the $0.66000 handle would bring the $0.66162 resistance level into play.

However, a drop below the $0.65000 handle would give the bears a run at the $0.64900 support level and the trend line.

The 14-period 4-Hourly RSI at 27.11 shows the AUD/USD in oversold territory. Buying pressure could intensify at the $0.65000 handle.