AUD/USD Price Forecast: Trades at $0.66823 as Unemployment Rises, DXY Declines
Arslan Butt•Thursday, May 16, 2024•2 min read
The Australian Dollar (AUD) broke its three-day winning streak after mixed employment data was released on Thursday. The Australian Bureau of Statistics reported a rise in the unemployment rate to 4.1% in April from 3.9%, marking the highest rate since January.
Additionally, Australia’s 10-year government bond yield traded lower at approximately 4.2%, following a Wage Price Index increase of 0.8% in Q1, slightly below the expected 0.9%. These figures have fostered a dovish outlook on the Reserve Bank of Australia’s (RBA) monetary policy, weakening the AUD/USD pair.
Short Bullet Points
- AUD/USD trades at $0.66823, down 0.14%, with key resistance at $0.6734.
- The Australian unemployment rate rose to 4.1% in April, the highest since January.
- The US Dollar Index (DXY) continues its decline, bolstering AUD/USD on lower US yields.
US Economic Data Impact
The AUD/USD pair initially received support on Thursday due to improved risk appetite after the release of lower-than-expected US Consumer Price Index (CPI) and Retail Sales data on Wednesday.
The CPI rose by 0.3% month-over-month in April, below the forecasted 0.4%, while Retail Sales remained flat against an expected 0.4% increase. These developments have heightened expectations of multiple rate cuts by the Federal Reserve (Fed) in 2024, exerting pressure on the US Dollar (USD). Consequently, the AUD/USD pair reached a four-month high of $0.6714 on Thursday.
Australian Employment Data Analysis
In April, the seasonally adjusted Employment Change in Australia showed an increase of 38.5K, bringing the total number of employed individuals to 14.3 million, surpassing the market expectation of 23.7K.
However, the rise in the unemployment rate to 4.1%, up from 3.9%, indicates an increasing number of job seekers, which could temper enthusiasm for the AUD. This jobless rate is the highest since January, with 30.3K more people unemployed, totalling 604.2K.
Influence of US Dollar Index (DXY) and Fed Rate Expectations
The US Dollar Index (DXY), which measures the USD against six major currencies, extended its losses for the third consecutive session.
Declining US Treasury yields contributed to the weakening Greenback, driven by the anticipation that the Fed might begin cutting interest rates as early as September. This sentiment supports the AUD/USD pair by making the US Dollar less attractive relative to the Australian Dollar.
Conclusion
The AUD/USD pair’s future movement will be influenced by several key factors, including US economic data releases and expectations of Fed rate cuts. With mixed Australian employment data and a rising unemployment rate, the outlook for the AUD remains cautious.
A strategic approach to trading the AUD/USD pair involves closely monitoring upcoming economic indicators and central bank comments that could impact market sentiment and price action.
AUD/USD Price Forecast
AUD/USD is trading at $0.66823, down 0.14% from the previous session. The pivot point is at $0.6714. Immediate resistance levels are at $0.6734, $0.6759, and $0.6779, while support levels are at $0.6649, $0.6614, and $0.6579.
These levels are crucial for traders as they indicate potential breakout or breakdown points.The Relative Strength Index (RSI) is at 66, suggesting overbought conditions and a possible bearish correction if buying pressure diminishes.
The 50-day Exponential Moving Average (EMA) at $0.6616 supports a medium-term bullish trend.A strategic approach involves selling below $0.67126, targeting a take-profit at $0.66483 and a stop-loss at $0.67500.
If resistance at $0.6734 holds, a pullback toward $0.6649 or lower is likely. Traders should monitor market sentiment closely for any changes.
In summary, while AUD/USD faces downward pressure, technical indicators suggest further bearish movement. Selling below $0.67126 with targets of $0.66483 and a stop-loss at $0.67500 is advisable.
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ABOUT THE AUTHOR
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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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