AUD to USD Forecast: Australian Labor Market in Focus

Highlights

• The AUD/USD fell by 0.09% on Friday, ending the session at $0.66814.
• On Monday, Australian labor market data warrants investor attention.
• Investors must also monitor stimulus chatter from Beijing and FOMC member reactions to the recent US inflation reports.

Friday Overview of the AUD/USD

The AUD/USD fell by 0.09% on Friday. Following a 0.19% loss on Thursday, the Australian dollar ended the session at $0.66814. The Australian dollar fell to a low of $0.66780 before rising to a high of $0.67287.

Australian Labor Market in Focus

On Monday, the Australian labor market will be in the spotlight. Tighter labor market conditions could support wage growth and disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation.

The net effect could be a higher-for-longer interest rate path to curb consumer spending. Downward trends in consumer spending could dampen inflationary pressures.

Economists forecast the ANZ-Indeed Jobs Ads to increase by 1.5% in December after falling 4.6% in November. Job ads reflect labor market conditions and need consideration before official employment numbers on Thursday.

Recent economic indicators from Australia have given the RBA food for thought. Inflation softened in November, while retail sales increased by more than expected.

Softer inflation numbers would allow the RBA to begin discussing rate cuts. However, an upward trend in consumer spending could drive demand-driven inflation. Labor market data could give the RBA a view on consumer spending and inflation.

Beyond the numbers, investors must consider stimulus chatter from Beijing and geopolitical risks. Increased geopolitical tensions could impact the buyer demand for the Aussie dollar. However, stimulus chatter from Beijing would support buyer appetite for the Australian dollar.

US Economic Calendar: Fed Chatter

On Monday, investors must monitor FOMC member commentary throughout the day. Producer prices for December supported bets on a March Fed rate cut. FOMC member reaction to the US CPI Report and US producer prices could impact buyer demand for the US dollar.

According to the CME FedWatch Tool, the probability of a March rate cut rose from 64.0% to 76.9% last week. Fed commentary could influence sentiment toward a March rate cut.

However, there are no US economic indicators on Monday. The US markets are closed for Martin Luther King Jnr Day.

Short-Term Forecast

Near-term trends for the AUD/USD will hinge on Australian labor market data, US retail sales, and Fed chatter. Tighter Australian labor market conditions could force the RBA to delay rate cuts. Softer US retail sales figures could raise bets on a March Fed rate cut, supporting an AUD/USD move toward $0.68.

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 move through the $0.67286 resistance level would bring the $0.68096 resistance level into play.

On Monday, the focus will be on Australian labor market data, Beijing, and the Fed.

However, a break below the 50-day EMA would support a fall to the $0.66162 support level.

A 14-period Daily RSI reading of 48.68 indicates an AUD/USD fall to the $0.66162 support level before entering oversold territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD sat below the 50-day EMA while remaining above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

An AUD/USD breakout from the 50-day EMA and the $0.67286 resistance level would give the bulls a run at the $0.68096 resistance level.

However, a fall through the 200-day EMA would bring the $0.66162 support level into play.

The 14-period 4-Hourly RSI at 45.34 indicates an AUD/USD drop to the $0.66162 support level before entering oversold territory.