Australian Dollar Weekly Forecast: Will Aussie Labor Market Data Fuel a Recovery?

Aussie Dollar Slide Persists: Key Drivers for Traders to Watch

A bearish streak grips the Australian dollar, with upcoming economic indicators set to shape the pair’s outlook amid global market volatility.

The AUD/USD pair slid by 1.12% in the week ending January 10, closing at $0.61441. The pair climbed to a Monday high of $0.63018 before tumbling to a Friday low of $0.61390, marking losses in 11 of the last 15 weeks.

Aussie Labor Market and Inflation Data in Focus

On Monday, January 13, Aussie job ads and inflation data will provide critical insights for AUD/USD traders. Economists expect ANZ-Indeed job ads to increase by 0.3% in December after sliding by 1.3% in November.

A larger-than-expected increase in job ads could signal a pickup in employment. A tighter labor market may fuel consumer spending and demand-driven inflation. This could delay an RBA rate cut, supporting Aussie dollar demand. Conversely, weak job ads may reinforce dovish RBA expectations, weighing on the AUD/USD pair.

However, inflation data will also be crucial. Economists expect the TD-MI Inflation Gauge to rise 0.2% in December, mirroring November’s increase. A higher inflation figure may test bets on a February RBA rate cut. On the other hand, a softer inflation figure could lift expectations of a February move.

Consumer Confidence and Spending Trends

The Westpac Consumer Confidence Index will require consideration on Tuesday, January 14. Improving consumer confidence may signal stronger household spending, potentially driving inflationary pressures. Conversely, another fall in confidence could support bets on a more dovish RBA rate path.

Labor Market and Inflation Expectations as Decisive Factors

Australia’s unemployment data on Thursday, January 16, will likely define the AUD/USD trajectory.

Economists expect Australia’s unemployment rate to increase from 3.9% in November to 4.0% in December. A higher unemployment rate may curb wage growth, dampening consumer spending. Weaker spending may ease inflationary pressures, supporting a more dovish RBA rate path. A surprise drop in unemployment may sink market bets on a February RBA rate cut.

Consumer inflation figures on Friday, January 12, will conclude a data-heavy week for the Aussie dollar. Consumers may delay purchases if they expect prices to fall near term, dampening demand-driven inflation. Conversely, expectations of higher prices could fuel consumer spending and inflation, delaying an RBA rate cut.

Expert Views on the Aussie Labor Market and RBA Rate Path

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on recent inflation data, stating,

“Aus Nov CPI rose to 2.3% from 2.1% with less energy rebates partly offset by lower infl in food, new dwelling costs & travel. The key is that trimmed mean infl fell more than exp to 3.2%yoy from 3.5% supporting the case for a rate cut as early as Feb. Dec qtr infl (29 Jan) is key.”

Potential AUD/USD Responses to Crucial Aussie Data

Stronger-than-expected data, suggesting a more hawkish RBA rate path, could drive the AUD/USD pair toward $0.63 and the $0.63623 resistance level. Weak numbers and rising bets on multiple 2025 RBA rate cuts may drag the AUD/USD to the lower band of the downward channel.

US Economic Calendar: Inflation and the Fed in Focus

Turning to the US dollar, inflation data will likely dictate the Fed rate path through H1 2025.

US producer price trends will set the tone on January 14. Economists forecast producer prices to rise by 0.3% month-on-month in December, down from a 0.4% increase in November.

Softer figures may raise expectations of a March Fed rate cut. Producers adjust prices based on demand, influencing consumer price trends. However, higher producer prices could signal a pickup in inflationary pressures, supporting a more hawkish Fed rate path.

On January 15, the US CPI Report will be pivotal, however. Economists predict the annual inflation rate to rise from 2.7% in November to 2.8% in December. Hotter-than-expected inflation would likely fuel US dollar demand, sinking the AUD/USD pair. Conversely, a softer reading may ease AUD/USD selling pressure on expectations of a March Fed rate cut.

Other stats include the weekly jobless claims and manufacturing sector data. However, the inflation reports will likely be the key drivers in the week.

Fed commentary will also be crucial. Reactions to the inflation reports and insights into the Fed’s monetary policy outlook need monitoring.

Short-Term Forecast:

The AUD/USD outlook depends on labor market and inflation data from Australia and the US. Strong Australian data and rising bets on a March Fed rate cut could lift the pair toward $0.63. Conversely, weaker Australian data and a hawkish Fed stance may push the pair toward $0.60.

Economic indicators from China will also need consideration on Monday and Friday.  However, the Aussie data and US inflation trends will be the key drivers, with focus firmly on inflation and the labor markets.

Investors should monitor economic releases and central bank commentary closely. Access our detailed reports here for comprehensive AUD/USD insights.

AUD/USD Price Action

Daily Chart

Following the extended sell-off, the AUD/USD sits well below the 50-day and 200-day Exponential Moving Average (EMAs), affirming bearish price signals.

An Aussie dollar break above $0.62500 could enable the bulls to target the upper trend line. If the AUD/USD pair breaks out from the upper trend line, the pair could target the $0.63623 resistance level next.

Conversely, an AUD/USD drop below the January 10 low of $0.61390 could bring the lower trend line into play. If the pair breaks below the lower trend line, the bears may target the crucial $0.60 psychological support level.

With a 14-period Daily Relative Strength Index (RSI) reading of 27.54, the AUD/USD sits in oversold territory (RSI less than 30). Buying pressure could intensify at the January 10 low of $0.61390.