AUD to USD Forecast: Australian Employment Numbers Deliver Early Gains

Highlights

• The AUD/USD surged by 1.54% on Wednesday, ending the session at $0.66597.
• Dovish FOMC economic projections titled monetary policy divergence toward the Aussie dollar.
• On Thursday, Australian employment numbers and US retail sales are focal points.

Wednesday Overview of the AUD/USD

The AUD/USD surged 1.54% on Wednesday. After a 0.14% loss on Tuesday, the Aussie dollar ended the Wednesday session at $0.66597. The Australian dollar fell to a low of $0.65414 before striking a high of $0.66731.

Australian Labor Market in Focus

On Thursday, the Australian labor market was in focus. Better-than-expected employment numbers drove buyer demand for the Aussie dollar.

Employment increased by 61.5k in November vs. a 55.0k rise in October. Economists forecast an 11.0k increase. While the unemployment rate rose from 3.7% to 3.9%, the participation rate climbed from 67.0% to 67.2%. The pickup in the participation rate signaled an improving macroeconomic environment, with more people returning to the workforce.

According to the ABS,

• Full-time employment increased by 57.0k, while part-time employment rose by 4.5k.
• The employment-to-population ratio increased to 64.6%.
• Monthly hours worked increased to 1,944 million.

The Aussie dollar responded to the upbeat labor market report, rallying to a post-stat high of $0.66891. A jump in full-time employment was bullish for the Aussie dollar. Tighter labor market conditions could support wage growth and consumer spending. An upward trend in consumer spending would fuel demand-driven inflation, forcing the RBA to keep rates higher for longer.

Forecasts for US Retail Sales and Jobless Claims Support a Dovish Fed

On Thursday, US retail sales and jobless claims will garner investor interest. An unexpected rise in retail sales could test investor bets on an H1 2024 Fed rate cut. Tight labor market conditions support wage growth and consumer spending. An upward trend in consumer spending would fuel demand-driven inflation, forcing the Fed to maintain a hawkish rate path.

While retail sales will be the focal point, a jump in jobless claims could counter an unexpected rise in retail sales. Softer labor market conditions could impact disposable income and consumer spending.

Economists forecast retail sales to fall by 0.1% in November after a 0.1% decline in October. However, economists expect initial jobless claims to hold steady at 220k in the week ending December 9.

Short-Term Forecast

Near-term trends for the AUD/USD could hinge on US retail sales and labor market numbers. After the Wednesday rally, tight US labor market conditions and a pickup in consumption would test bets on an H1 2024 Fed rate cut.

AUD/USD Price Action

Daily Chart

The AUD/USD sat above the 50-day and 200-day EMAs, sending bullish price signals.

An AUD/USD return to the $0.67 handle would support a move to the $0.67296 resistance level.

US retail sales and jobless claims are focal points later in the Thursday session.

However, a fall through the $0.66162 support level would give the bears a run at the 200-day EMA and the trend line.

A 14-period Daily RSI reading of 62.55 suggests an AUD/USD move to the $0.67286 resistance level before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD held above the 50-day and 200-day EMAs, affirming bullish price signals.

An AUD/USD return to the $0.67 handle would give the bulls a run at the $0.67286 resistance level.

However, a fall through the 50-day EMA would bring the trend line into play.

The 14-period 4-Hourly RSI at 70.80 shows the AUD/USD in overbought territory. Selling pressure could intensify at the $0.67 handle.