Possibility of further reprieve for AUD/USD ahead of AU jobs data?
Improved sentiment overnight towards US banks and financial stability led to a rally in risk assets overnight for markets and the AUD/USD.
Improved sentiment overnight towards US banks and, more broadly, towards financial stability led to a rally in risk assets overnight, including the AUD/USD.
The rally in the AUD/USD overnight came despite a warmer-than-expected US inflation print, which showed the deceleration in core inflation (core inflation in February rose 0.5% vs 0.4% exp) has stalled. As well as weaker-than-expected Australian Consumer and Business confidence data released yesterday.
Specifically, the Westpac consumer confidence index remained unchanged at 78.5 (recessionary levels) and contained a rise in unemployment expectations and a fall in spending intentions. Australian Business Confidence fell 10 points to -4 in February, the lowest since last November. Both indicate a slowdown is underway as the full impact of the RBA's rate hiking cycle takes effect.
Attention now turns to the Australian Labour Force report which will be released on Wednesday, 11.30am AEDT.
What is "expected?"
Several factors suggest a rebound in employment is likely after two consecutive monthly declines. The most recent forecast has the market looking for a gain in employment of 45k and for the unemployment rate to fall to 3.6%.
What would constitute a surprise?
Should the unemployment rate disappoint and print at 3.7% or higher, it may well see the RBA move to the sidelines in April and spark further conversation around RBA rate cuts into the second half of this year. This would be a positive for the ASX 200 and a negative for the AUD/USD.
Conversely, should the unemployment rate print at 3.5% or lower, it would push back talk of an RBA pause until May, pending the release of Q1 2023 CPI data on April 26. This would be a negative for the ASX 200 and a small net positive for the AUD/USD.
AUD/USD technical analysis
Last week the AUD/USD closed 2.57% lower at .6583, battered by the heavyweights of a dovish RBA, a hawkish Fed and risk aversion selling. The clean break of support at .6700/80 negated our positive bias and resulted in a negative bias looking for .6500c, leaning again the band of resistance at .6700c/.6800c, which includes the 200-day MA.
The downside follow-through we were expecting has not eventuated and has weakened our bearish conviction.
This is partially due to the dramatic repricing in the rates market following the regional banking failures over the weekend that now sees interest rate cuts priced into the curve for the US. and Australia in the second half of this year.
Nonetheless, we will remain with the negative bias unless the AUD/USD were to see a break above the downtrend resistance at .6710 and, more importantly, a sustained break back above .6800c.
AUD/USD daily chart
This information has been prepared by IG, a trading name of IG Markets 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. See full non-independent research disclaimer and quarterly summary.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market.
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.