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Wednesday Overview of the AUD/USD

The AUD/USD gained 0.03% on Wednesday. After a 2.04% surge on Tuesday, the Aussie dollar ended the day at $0.65083. The Aussie dollar fell to a low of $0.64833 before rising to a high of $0.65419.

Australian Employment Keeps Pressure on the RBA

On Thursday, Australian employment figures for October drew investor interest. After hotter-than-expected wage growth in Q3, Australian employment figures may maintain pressure on the RBA to consider more rate hikes.

The Australian unemployment rate increased by 3.6% to 3.7% in October. However, an increase in the participation rate pushed the unemployment rate higher.

According to the ABS,

  • The participation rate increased from 66.8% to 67.0% in October 2023.
  • Full-time employment increased 17k, with part-time employment rising 37.9k.
  • Underemployment remained at 6.3%.

Tight labor market conditions support wage growth, fueling household spending and demand-driven inflation. An upward trend in household spending would be positive for the Australian economy. Private consumption contributes over 50% to the Australian economy. However, a more hawkish RBA rate path would raise borrowing costs, reducing disposable income and consumer spending.

Australian Employment Report Sinks the Aussie Dollar

The Aussie dollar responded to the employment report, rising to a high of $0.65169 before sliding to a low of $0.64907.

AUDUSD 161123 3 Minute Chart

US Labor Market, Manufacturing, and Fed Speakers in Focus

On Thursday, the US labor market will also be in focus. After softer inflation and retail sales, a spike in US initial jobless claims would further raise bets on an H1 2024 Fed rate cut.

A weaker labor market reduces consumer confidence, eases wage growth pressures, and dampens disposable incomes. Falling disposable income impacts consumer spending and helps ease demand-driven inflationary pressures.

The labor market numbers are the focal point. However, the Philly Fed Manufacturing Index and industrial production figures also need consideration. Investors would likely respond to early signs of a hard landing.

Beyond the numbers, Fed speakers will also draw attention. FOMC members Michael Barr, Lisa Cook, Loretta Mester, Christopher Waller, and Fed Vice Chair John Williams are on the calendar to speak. Reaction to the US CPI Report and retail sales figures will need monitoring.

Short-Term Forecast

After the recent US economic indicators, near-term trends for the AUD/USD hinge on Fed speakers. Affirmation of market bets on the Fed ending its rate hike cycle could support an Aussie dollar move through $0.65220.

AUD/USD Price Action

Daily Chart

The AUD/USD remained above the 50-day EMA while sitting below the 200-day, affirming bullish near-term but bearish longer-term price signals.

An AUD/USD break above $0.65220 would support a break above the 200-day EMA to target the trend line. $0.65220 has been a resistance point in recent months.

Market risk sentiment, Fed speakers, and US labor market figures will be in focus.

However, a drop below the $0.64900 support level would give the bears a run at the 50-day EMA.

A 14-period Daily RSI reading of 60.15 indicates a move to the 200-day EMA before entering overbought territory (typically above 70 on the RSI scale).

AUDUSD 161123 Daily Chart

4-Hourly Chart

The AUD/USD remains above the 50-day and 200-day EMAs, reaffirming bullish near-term price signals.

An AUD/USD move through $0.65220 would give the bulls a run at the trend line and $0.66162 resistance level.

However, a fall through the $0.64900 support level would support a fall toward the 50-day EMA.

The 14-period 4-Hourly RSI at 67.49 suggests an AUD/USD move through $0.65220 before entering overbought territory.

AUDUSD 161123 4-Hourly Chart

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