AUD to USD Forecast: Weighing Australian Labor Trends Against US Jobless Claims

Australian Labor Market and the RBA

RBA Chief Economist Sarah Hunter will put the AUD/USD in focus on Thursday (May 16). Reactions to the Australian government budget and Q1 2024 wage growth numbers warrant investor attention.

Softer-than-expected wage growth figures tempered investor speculation about a 2024 RBA rate hike. Nevertheless, views on the budget could also influence sentiment toward the RBA rate path.

Later in the Asian session, Australian labor market data will attract investor attention. Weaker labor market conditions could fuel bets on a 2024 RBA rate cut. During the RBA press conference, RBA Governor Michelle Bullock discussed tight labor market conditions being a relief for the RBA. Hints of a deteriorating labor market could force the RBA to begin discussions about interest rate cuts.

A higher unemployment rate could affect wage growth and disposable income. Downward trends in disposable income could force consumers to curb spending and dampen demand-driven inflation.

Economists forecast the Australian unemployment rate to increase from 3.8% to 3.9% in April.

US Economic Calendar: US Labor Market and the Fed

Later in the Thursday session, US initial jobless claims will draw investor interest. Another spike in US initial jobless claims could fuel investor bets on a September Fed rate cut. A deterioration in labor market conditions could affect wages, disposable income, and consumer confidence. The net effect could be a pullback in consumer spending, dampening demand-driven inflation.

Economists forecast initial jobless claims to decline from 231k to 220k.

Other stats include the Philly Fed Manufacturing Index, housing market data, and US industrial production numbers.

Weaker-than-expected numbers could test investor expectations of the US avoiding a recession. Moreover, housing sector data could draw the interest of the Fed. Housing services inflation remains a bugbear for the Fed. A deterioration in housing market conditions or an increased supply could soften housing sector-related inflation.

After the recent inflation and retail sales data, FOMC member chatter also needs monitoring. FOMC members Michael Barr, Patrick Harker, Loretta Mester, and Raphael Bostic are on the calendar to speak on Thursday. Reactions to the recent US economic data and views regarding a September Fed interest rate cut could move the dial.

Short-Term Forecast

Near-term AUD/USD trends will likely hinge on the Australian and US labor market data and central bank chatter. Tighter-than-expected Australian labor market data could reignite investor bets on an RBA rate hike. In contrast, investors expect the Fed to begin discussing rate cuts, titling monetary policy divergence toward the Aussie dollar.

AUD/USD Price Action

Daily Chart

The AUD/USD sat comfortably above the 50-day and 200-day EMAs, confirming the bullish price trends.

An Aussie dollar break above the $0.67003 resistance level could give the bulls a run at the $0.67500 handle. A return to $0.67500 would bring the $0.67967 resistance level into play.

Central bank commentary, Australian labor market data, and the US economic calendar need consideration.

Conversely, an AUD/USD drop below $0.66500 could give the bears a run at the $0.65760 support level and the 200-day EMA. A fall through the 200-day EMA would bring the 50-day EMA into play.

With a 14-period Daily RSI reading of 65.56, the AUD/USD may return to the $0.67500 level before entering overbought territory.