Daily Price Outlook
During the European trading session, the AUD/USD currency pair struggled to keep up its winning streak, dipping to around the 0.6215 level and even touching an intra-day low of 0.6196.
This decline came after Australia’s employment report showed a rise in the seasonally adjusted unemployment rate to 4.0% in December, up from 3.9% in November.
The data, released by the Australian Bureau of Statistics (ABS), met market expectations but signaled a slight cooling in the labor market, which weighed on the Aussie Dollar.
Meanwhile, the US Dollar remained under pressure, with the US Dollar Index (DXY) trading near 109.00. The Greenback extended its losses as US inflation data for December came in cooler than expected, fueling speculation that the Federal Reserve might cut interest rates twice this year. These factors combined to keep AUD/USD under selling pressure during the session.
Mixed Employment Data and Weak Consumer Confidence Weigh on AUD/USD
On the data front, Australia’s unemployment rate rose slightly to 4.0% in December, up from 3.9% in November, as reported by the Australian Bureau of Statistics (ABS).
However, employment saw a strong increase, adding 56,300 jobs in December, much higher than the expected 15,000. This marked a significant improvement from November’s revised figure of 28,200.
The mixed data showed that while more people found jobs, unemployment also rose due to a larger number of people actively seeking work.
Bjorn Jarvis, head of labor statistics at the ABS, highlighted some important trends. The employment-to-population ratio reached a record high of 64.5%, which is 0.5% higher than a year ago and 2.3% above pre-COVID-19 levels.
He noted that the rise in both employment and unemployment pushed the participation rate higher, indicating more Australians are either working or looking for jobs. This suggests a robust but evolving labor market.
Meanwhile, consumer sentiment remained weak, with the Westpac Consumer Confidence Index dropping by 0.7% to 92.1 points, reflecting ongoing pessimism about the economy.
The dip in confidence has raised concerns about interest rate decisions, with markets now expecting the Reserve Bank of Australia to lower its cash rate from 4.35% by 25 basis points in February and potentially a full rate cut by April.
The mixed Australian employment data and weak consumer confidence weighed on the AUD/USD pair, as rising unemployment and pessimism about the economy raised concerns over rate cuts by the Reserve Bank of Australia, pushing the Aussie Dollar lower against the US Dollar.
Weaker US Inflation Data Fuels Expectations of Rate Cuts, Impacting AUD/USD Pair
On the US front, the US Dollar Index (DXY), which tracks the Greenback against six major currencies, is trading near 109.00. The US Dollar has been weakening due to lower-than-expected US inflation data for December.
The Consumer Price Index (CPI) rose by 2.9% year-over-year, up from 2.7% in November. On a monthly basis, CPI increased by 0.4%, slightly higher than the 0.3% in November.
This cooling inflation has led to expectations that the Federal Reserve might cut interest rates twice this year.
The US Core CPI, excluding food and energy prices, increased by 3.2% annually, which was below November’s figure and analysts’ expectations of 3.3%.
On a monthly basis, core CPI grew by 0.2%. The Producer Price Index (PPI) also showed slower growth, rising by just 0.2% month-over-month in December, below the 0.3% forecast, signaling easing inflationary pressures.
Meanwhile, Scott Bessent, a Treasury Secretary nominee, stressed the importance of keeping the US Dollar as the world’s reserve currency to ensure economic stability.
According to the Federal Reserve’s Beige Book survey, economic activity grew moderately in late 2023, with strong consumer spending during the holiday season.
However, manufacturing slowed slightly due to inventory build-up, and policymakers, including Michelle Bowman, are managing expectations of slower interest rate cuts.
Therefore, the weaker-than-expected US inflation data and cooling economic pressures suggest the Federal Reserve may cut interest rates, which likely weakened the US Dollar. As a result, the AUD/USD pair could see upward movement, benefiting the Australian Dollar.
AUD/USD – Technical Analysis
The AUD/USD pair is trading at $0.62007, down 0.41% on the day, reflecting persistent bearish pressure in the market. The pair hovers just below the pivot point at $0.62071, a critical threshold for determining short-term sentiment.
Immediate resistance is seen at $0.62455, with higher targets at $0.62898 and $0.63274. On the downside, immediate support lies at $0.61781, followed by $0.61488 and deeper support at $0.61208.
The 50-day EMA at $0.62045 aligns closely with the pivot point, reinforcing the significance of the $0.62071 level. The downward trend is evident as the price remains below the 50 EMA, signaling that sellers dominate the market.
Short-term momentum indicates a potential move toward the $0.61488 support level if the pair fails to reclaim $0.62071.
Traders should monitor the $0.62071 pivot closely. A sustained break below this level would likely accelerate selling pressure, targeting $0.61781 initially, with an extended decline toward $0.61488.
Conversely, a move above $0.62455 could signal a reversal and test higher resistance levels, though the broader outlook remains bearish.
Related News
- GOLD Price Analysis – Jan 16, 2025
JOIN LHFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.