On Thursday, the Australian dollar exchange rate to USD (AUD/USD), continued to fall as attention shifted towards Friday’s US Non-Farm Payroll (NFP), and Tuesday’s Reserve Bank of Australia interest rate announcement. The Australian dollar to USD exchange rate dropped as low as 0.6520. This was its lowest level since May 1.
US nonfarm payrolls data ahead
In the AUD/USD world, this week’s biggest news was the Federal Reserve rate decision on Wednesday. As we reported earlier , , the Federal Reserve decided to keep interest rates between 5.25% and 5.50 percent unchanged. The rates have been in the same range since last January.
The bank stated that it was pleased with the state of the economy, as the country avoided a “hard landing”. The inflation rate is on the rise, and both the core PCE (personal consumption expenditure) and the headline are approaching the target of 2.0%.
Now, the Fed is most concerned about the second part of the dual mandate: the labor market. The bank said in a press release that job growth was slowing down and it felt comfortable with lowering rates until inflation reached 2.0%.
On Wednesday, these concerns grew after ADP released a weak report on private sector payrolls. The company reported that 122,000 new jobs were created in July, which was the lowest number in several months.
A report released on Thursday revealed that unemployment claims increased last week to their highest level since August of last year. Labor data from the ISM Non-Manufacturing Data dropped to 43.
Fed officials have said that they will be relying on data to determine when interest rates will begin being cut. The BLS will release the nonfarm payroll data on Friday. This is one of the key data points to keep an eye out for.
This report will be scrutinized by economists for three reasons. As always, the first thing they’ll do is look at this report. The economists are expecting this number to reflect that over 170,000 new jobs were added in July, after the addition of over 204k. Traders will be watching to see if the Bureau will lower its June report, as they have done in previous months.
The second, and perhaps most important, is that they’ll be watching the rate of unemployment, which measures the percentage of workers of legal age not in the workforce. Recent data shows that unemployment rose from 3.5% to 4,1% in June, after a low of 3,5% in 2023. Another sign of an increasing rate will increase the likelihood that a rate reduction is on its way.
Finally, traders are watching for wage increases in the country. There are indications that wages may be slowing down, even though they are still increasing. According to the consensus, average hourly earnings in June decreased from 3.9% down to 3.7%.
Reserve Bank of Australia Rate Decision
Next week, the Reserve Bank of Australia will announce its rate decisions. The bank’s signal that they may feel comfortable raising rates again will make this a very important meeting.
Analysts believe the RBA is likely to maintain rates at current levels and even hint they will remain high for a longer period of time.
Recent Australian inflation figures showed prices falling, but at a slower pace. The CPI headline remained at 1.0% during the fourth quarter, but then increased to 3.8% YoY.
The closely watched weighted CPI fell from 4,4% in the first quarter to just 4.1% in the second, lower than median estimates of 4.3%. On a quarterly basis, it went from 1,1% to 0,8%.
In the third quarter, the trimmed CPI continued to fall. It reached 3.8% YoY at 0.8% QoQ. These numbers, while still above the RBA target of 2.0%, are on the rise.
Further data revealed that Australia’s retail sales fell by 0.3% during the third quarter. Data released on Thursday showed the increase in exports of 1.7% for June, while imports were down by 0.5%.
These numbers mean that RBA is likely to be the final central bank to begin cutting rates. It is expected that they will begin cutting rates in December. Fed is expected to start in September, while ECB and BoE already have.
Technical Analysis of the AUD/USD
In the last few weeks, there has been a significant downward movement in Australian dollars. The Australian dollar has fallen from its key resistance level of 0.6800 down to about 0.6510. The highest level in July was also the same as the trendline that connected the largest swings in February of last year.
This pair is now trading below its 50-day and hundred-day moving averages. The Relative Strength Index has also fallen below its oversold levels. The pair is likely to continue dropping as the sellers aim for the lower end of the ascending channel, at 0.6440.
The post AUD/USD Forecast: Signal ahead of NFP Data, RBA Decision may be Modified as Updates unfold
