Overview
The latest employment report from Australia indicates a robust job market, which keeps the Reserve Bank of Australia (RBA) vigilant but not necessarily inclined to raise interest rates. The Australian dollar (AUD) against the US dollar (USD) is expected to face potential pullbacks towards the 0.70 level.
Key Findings from the Employment Report
- The unemployment rate remains steady at 4.1%, which is below the 12-month average of 4.2% and significantly lower than the long-term average of 6.5%.
- The participation rate increased from 66.7% to 66.9%, contributing to a tighter labor market.
- Full-time employment saw an increase of over 50,000 jobs for the second consecutive month.
- Part-time employment, however, experienced a decline of 32,700 jobs, marking the largest drop in six months.
Market Reactions and RBA Outlook
The muted response from both the Australian currency and bond markets suggests that the employment report does not significantly alter expectations for the RBA's next meeting, where a cash rate of 3.85% is anticipated to be maintained. The overall data appears to support economic stability.
Analysts predict a modest retracement in the Australian dollar, with potential targets set at 0.70 and 0.69, although short-term trading may remain volatile.
AUD/USD Technical Analysis
Technical analysis of the AUD/USD pair indicates a solid uptrend that may require a pause. Recent price action shows two notable upper wicks, suggesting that bullish momentum is waning. The weekly Relative Strength Index (RSI) is heavily overbought, indicating potential for a price correction.
On the daily chart, a bearish engulfing candle has formed, marking a lower high. While a bull flag pattern could be emerging, the prevailing bias leans towards a downward drift towards the 0.70 level. A breach below this level could bring 0.69 into focus, potentially attracting dip buyers.
Conversely, a break above the 2023 high of 0.7157 would invalidate the current bearish outlook.