AUDUSD Forecast – Recesson Risks Dampen Demand for Risky Currencies

The Australian Dollar is edging lower on Thursday after weak U.S. retail sales and industrial production reports stoked recession worries and encouraged investors to shed riskier currencies while nudging them toward safe-haven assets like Treasury yields, the U.S. Dollar and the Japanese Yen.

Hawkish comments from Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard added to the gloom, with both Fed officials expecting U.S. interest rates above 5% this year. This assessment conflicts with investor expectations calling for a 4.88% terminal rate.

At 07:00 GMT, the AUDUSD is trading .6892, down 0.0049 or -0.71%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.65, down $0.48 or -0.69%.

Australia Employment Dips; Unemployment Rate Unchanged

Domestically, Australia employment unexpectedly dipped in December following an outsized gain the month before in a sign the red-hot labor market might be cooling, though the jobless rate stayed near five-decade lows. The news may prompt the Reserve Bank of Australia (RBA) to perhaps pause on a rate hike at its February meeting.

Figures from the Australian Bureau of Statistics (ABS) on Thursday showed net employment fell 14,600 in December from November, when it surged by a revised 58,200, and missed forecasts for an increase of 22,500.

On the brighter side, the jobless rate held at 3.5%, just above the recent 48-year trough of 3.4%, while the participation rate dipped to 66.6% from a record high of 66.8% in November.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has shifted to the downside. A trade through .7064 will signal a resumption of the uptrend. A move through .6688 will change the main trend to down.

The minor trend is down. It turned down earlier today when sellers took out .6930. This shifted momentum to the downside.

The nearest resistance is a minor pivot at .6962. The closest support is a minor pivot at .6876, followed by a 50% level at .6846.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .6876 is likely to determine the direction of the AUDUSD into the close on Thursday.

Bearish Scenario

A sustained move under .6876 will indicate the selling pressure is getting stronger. This could trigger a quick break into the minor bottom at .6860, followed by a 50% level at .6846.

Buyers could come in on the first test of .6846. A break through this level, however, could trigger an acceleration into the long-term 50% level at .6760.

Bullish Scenario

A sustained move over .6876 will signal the return of buyers. If this creates enough upside momentum then look for a potential surge into .6962.

Side Notes

We don’t expect to see any major buying until there is a test of the major support level at .6760.