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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

AUD/USD faces challenges: Chinese GDP and Australian jobs report in spotlight

AUD/USD faces challenges with softer inflation and iron ore dip. Chinese GDP and Thursday's aussie jobs report key. Expectations of +15k employment and 3.9% unemployment crucial for RBA's 2024 rate outlook.

Source: Bloomberg

Last week saw a second consecutively weekly fall for the AUD/USD, as a softer-than-expected Australian inflation report and a 4.4% fall in the price of iron ore weighed on the local unit.

Whether the AUD/USD can regain upside traction after its almost 10% rally into year-end will depend to a large degree on Chinese GDP and activity data due for release on Wednesday, which will provide fresh insights into the health of the Chinese economy at the beginning of 2024.

Locally, the release of the latest Australian labour force report schedule for release on Thursday, previewed below, will also have a strong say in how the AUD/USD trades this week.

Employment data (Thursday, January 18th at 11.30 am AEST)

The Australian economy added 61.5k jobs in November vs. the 11.5k expected. The unemployment rate rose to 3.9% from 3.8%, as the participation rate surged to a record high of 67.2% from 67%.

Bjorn Jarvis, ABS head of labour statistics, said: "With employment increasing by 61,000 people, and the number of unemployed people rising by 19,000, the unemployment rate rose to 3.9 per cent in November." This month, the market is looking for a +15k rise in employment and for the unemployment rate to remain unchanged at 3.9%. The participation rate is also expected to remain unchanged at 67.2%.

Ahead of the jobs report, there are two RBA rate cuts priced into the Australian rates market, with a first-rate cut for June and a second by December, which would take the cash rate back to 3.60% by year-end. If the unemployment rate were to tick up to 4% or above, it might see the start of a third rate cut priced into the rates curve for 2024.

Australia's unemployment rate chart

Source: ABS

AUD/USD technical analysis

From the October .6270 low to the December .6871 high, the AUD/USD gained just under 10% in two months. The rally appears to have unfolded in five waves (Elliott Wave), which suggests the pullback from the .6871 high is part of a correction, rather than a reversal lower.

The correction will likely be well supported initially at the early January .6640 low, reinforced by the 200-day moving average at .6580. A very good layer of horizontal support is not far below at .6520/00.

If we were to see evidence of basing near one of the support levels mentioned above, it might be the setup for a long trade looking for a rebound towards the .6871 high.

AUD/USD daily chart

Source: TradingView
  • Source: TradingView. The figures stated are as of 15 January 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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