AUD to USD Forecast: How Employment Figures Could Shape RBA’s Next Move

Highlights

• The overnight FOMC meeting minutes left the AUD/USD down 0.47%.
• Australian employment numbers will influence policy sentiment. The RBA watches tight labor conditions as a lever to control wage growth and inflation.
• This afternoon, falling US jobless claims could affirm hawkish bets, challenging the softer labor market theory.

Overview

On Wednesday, the AUD/USD fell by 0.47% to end the day at $0.64239. It was another choppy session. The Aussie dollar rose to an early session high of $0.64682 before sliding to a post-FOMC meeting minutes low of $0.64158. Hawkish minutes fueled bets on further Fed rate hikes to tame inflation.

Australian Employment to Influence RBA Policy Sentiment

This morning, employment figures from Australia will move the dial. After the softer-than-expected Australian wage growth numbers, weak employment numbers could shut the door on further RBA interest rate hikes.

Economists forecast employment to increase by 15.0k but for the unemployment rate to rise from 3.5% to 3.6% in July.

Australian employment remains a consideration for the RBA. Tight labor market conditions drive wage growth and demand-driven inflation. Higher interest rates lead to a pullback in hiring and a decline in purchasing power, with the net effect of easing consumption and, ultimately, consumer price pressures. Tighter labor market conditions could reignite bets on an RBA rate hike to tackle wage growth and bring inflation to target.

While there are no economic indicators from China, investors should monitor chatter from Beijing throughout the session. A more sizeable stimulus package would deliver an Aussie dollar relief rally.

Jobless Claims in the Spotlight Post-FOMC Minutes

Philly Fed Manufacturing Index numbers and US jobless claims will also provide direction. A fall in jobless claims would question the theory of a softer US labor market and support hawkish Fed bets.

We expect the jobless claims to trump the Philly Fed Manufacturing data.

It is worth noting that the Philly Fed numbers are unlikely to influence the Fed. The manufacturing sector accounts for less than 30% of the US economy and is unlikely to dictate sentiment toward Fed monetary policy. In contrast, tight labor market conditions support further Fed rate hikes to curb demand-driven inflation.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD hover below the $0.6450 – $0.6430 support band. Significantly, the Aussie remained below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

Looking at the 14-Daily RSI, 28.88 reflects the AUD/USD in oversold territory. However, the RSI aligns with the EMAs, signaling a fall to sub-$0.64. However, avoiding sub-$0.64 would support a move through the $0.6450 – $0.6430 support band to target the Wednesday high of $0.64805.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD sits below the $0.6450 – $0.6430 support band. Significantly, the AUD/USD remains below the 50-day and 200-day EMAs, affirming bearish near and longer-term price signals.

Looking at the 14-4-Houly RSI, 32.47 reflects a bearish sentiment, with selling pressure overweighing buying pressure. The RSI is aligned with the EMAs supporting a fall to sub-$0.64. However, a move through the $0.6450 – $0.6430 support band would give the bulls a run the 50-day EMA.