AUD to USD Forecast: Will Australian Job Data Boost the Aussie Towards $0.70?

Aussie Labor Market in Focus

Australian labor market data will influence buyer appetite for the AUD/USD on Thursday, July 18.

Economists expect the unemployment rate to remain steady at 4.0% in June.

Furthermore, economists predict full-time employment to rise by 5k in June following a 41.7k increase in May.

The chances of an RBA rate hike could increase if unemployment is lower and full-time employment is higher than expected. Rising bets on an RBA rate hike could signal an AUD/USD return to $0.70.

Tighter labor market conditions could support wage growth and increase disposable income. Higher disposable income may fuel consumer spending and demand-driven inflation.

Conversely, a higher unemployment rate could sink bets on an RBA rate hike. Nevertheless, the AUD/USD could trend higher on expectations of multiple 2024 Fed rate cuts.

RBA Rate Hike on the Table

In June, RBA Governor Michele Bullock warned that Board Members discussed raising the cash rate. Since the June RBA meeting, hotter-than-expected inflation has fueled speculation about an RBA rate hike. Tighter labor market conditions and the threat of higher consumer spending could be the trigger to raise borrowing costs further to tame inflation.

What the Experts Say

Economists have mixed views on the RBA interest rate trajectory despite the spike in consumer price inflation.

• Westpac Chief Economist Luci Ellis had a dovish outlook, expecting the RBA to cut interest rates in November.
• Sky News Business Editor Ros Greenwood highlighted the fragility of the Australian economy, which is barely above recession, suggesting that under normal circumstances, the RBA would cut rates to stimulate growth, but it currently cannot.
• Bloomberg TV APAC Chief Markets Editor David Ingles had a more hawkish outlook. He said that hotter-than-expected inflation has led to a 50-50 probability of an RBA rate hike in September.

Meanwhile, US economic indicators could signal multiple 2024 Fed rate hikes.

US Economic Data: US Continuous Jobless Claims

Later in the session on Thursday, US continuous jobless claims will garner investor interest.

Economists predict continuous jobless claims to increase from 1,852k in the week ending June 29 to 1,855k in the week ending July 6.

Higher claims may fuel speculation about a July Fed rate cut and multiple 2024 interest rate cuts.

Signs of a deteriorating US labor market and a more dovish Fed rate path would support an AUD/USD move toward $0.70. Multiple Fed rate cuts would narrow interest rate differentials in favor of the Aussie dollar.

Economists and the Fed Align on the US Labor Market

Economists have commented on the recent uptrend in continuous jobless claims.

Arch Capital Global Chief Economist Parker Ross reacted to the jobless claims report for the week ending June 29. He said,

“Continuing claims still reflect a more substantial softening of the labor market.”

His comments were before Fed Chair Powell testified on Capitol Hill, acknowledging that labor market conditions had softened.

Short-Term Forecast: Bullish

Near-term AUD/USD trends depend on the Aussie and US labor market data. A fall in the Aussie unemployment rate could greenlight an RBA rate hike. Conversely, higher continuous jobless claims could raise bets on a July Fed rate hike. Monetary policy divergence could tilt toward the Aussie dollar and signal an AUD/USD move toward $0.70.

Investors should remain alert, with the Communist Party’s Third Plenum concluding on Thursday. Monitor the real-time data, news updates, and expert commentary to adjust your trading strategies.

Stay updated with our latest views and analysis to manage exposures to the forex markets.

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 AUD/USD breakout from the $0.67500 handle could give the bulls a run at the $0.67967 resistance level. Furthermore, a break above the $0.67967 resistance level could bring the $0.68500 handle into play.

Updates from the Third Plenum and labor market data require consideration.

Conversely, an AUD/USD break below the $0.67003 support level could signal a drop toward the 50-day EMA.

With a 14-period Daily RSI reading of 56.30, the AUD may break above the $0.67967 resistance level before entering overbought territory.