- AUD/USD has been moving sideways around 0.7300 recently amid subdued market conditions.
- Weak labor market data does not seem to affect the aussie too much.
AUD/USD trading conditions have been quiet since the start of the European session. With the pair oscillating on either side of the 0.7300 level over the past few hours.
The pair is currently losing roughly 0.5 percent on a daily basis. Having fallen from around 0.7325 during Asian trading hours, continuing its downward trend that began on Wednesday. In brief, the pair has dropped from above 0.7300 as a result of a considerably higher-than-expected US consumer price inflation report. Which has bolstered expectations that the Fed would begin rising interest rates sooner in 2022. And likely quicken the pace of its QE tapering early next year.
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The Australian dollar was pulled down by the dismal October labor market report released by the Australian Bureau of Statistics during Asian session hours. According to several market experts.
The economy unexpectedly lost about 50,000 jobs in October, against predictions for a 50,000-job gain. And the unemployment rate rose to 5.2 percent from 4.6 percent in September. More than predicted (versus an expected increase to 4.8 percent ). However, the AUD/decline USD’s is due to USD strength rather than localized Aussie weakness, with the NZD and CAD losing considerably more against the dollar on the day.
There are few noticeable support levels ahead of 0.7200 if AUD/USD can break more firmly below 0.7300. In the coming session. The September 29 bottom at 0.7170 and the August low just over 0.7100 are the most notable fall levels.
Labor market to improve in November
MUFG claims that “The survey reporting period ending October 9″ ahead of the large reopening in New South Wales after October 11 and the start of the reopening in Victoria from October 21″ partly explains the worsening labor market circumstances in October despite the relaxing of tightening. As a result, the November employment report should indicate a significant improvement in labor market conditions, according to the bank.”
“Payrolls data shows solid employment growth in the second half of October; following the softening of the lockups,” Credit Agricole says. One of the reasons why the AUD is not lagging its risk/commodity sensitive G10 peers on Thursday could be expectations of a November labor market rebound.
Analysts, on the other hand, concurred that the weak labor market data, for the time being, supports the RBA’s dovish message that no rate hikes will be made in 2023. Furthermore, Credit Agricole believes that the RBA’s assessment will be reinforced by next week’s Australian wage statistics.
MUFG is bearish on the Australian dollar. The AUD STIR market price for 75bp hikes in 2022 is excessive and that the Fed will hike faster than the RBA. The Aussie dollar is likely to be exposed to China’s ongoing growth slowdown. And the Aussie dollar is vulnerable to weakness in iron ore prices, which are still falling to pre-Covid-19 levels. “In the immediate term, we expect AUD/USD to retest crucial support at the 0.7200 level,” MUFG says.