AUD/USD Finds Support Despite Higher AU Unemployment
AUD/USD Analysis
The pair is having a tough February, following a three-month profitable streak, as the USDOLLAR has benefited from the repricing in market expectations around the Fed's policy path. After the blockbuster jobs report earlier in the month, Tuesday's higher than expected CPI inflation and a series of hawkish Fed-speak, CME's FedWatch Tool now assigns the highest probability to rates peaking at a 5.5%, but still leaves room for cuts towards the end of the year. [1]
The Reserve Bank of Australia meanwhile, delivered another 25 basis points rate hike last week, pointed to "further increases" and removed the "…but it is not on a pre-set course" reference of the previous statement – striking a more hawkish tone. [2]
This was driven by raising inflation, as headline CPI hit 7.8% y/y in the fourth quarter and the highest since 1990. Furthermore, the labor market is "very tight", with unemployment hovering around fifty-year lows for a protracted period of time. [2]
Today's latest data however, showed that Unemployment ticked up to 3.7% (from 3.5% previously) in January, to the highest level in eight-moths. The release may take some pressure off from the RBA and AUD/USD initially reacted lower. However, unemployment is still close to historic lows and the central bank has pointed to further tightening. The Aussie avoided new month lows and quickly covered the losses, lacking frim direction.
AUD/USD remains vulnerable to the key 0.6800-0.6760 region, which contains a confluence of supports that have the ability to contain further losses. A strong catalyst will be needed for daily closes below this area, which would expose the pair to 0.6628.
On the other hand, the Aussie shows resiliency and may find the chance to retake 0.7000, but does not inspire much confidence at this stage, for setting new monthly highs (0.7158).
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 16 Feb 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html | |
| Retrieved 03 Jun 2023 https://www.rba.gov.au/media-releases/2023/mr-23-04.html |
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