- Employment in Australia fell sharply in December.
- The US reported strong retail sales in December.
- Traders cut the probability of the Fed’s first rate cut by March to 61%.
The AUD/USD outlook shows a hint of bearish momentum, with the Australian dollar falling as much as 0.04% on lower-than-expected December employment data. As a result, there is speculation that interest rates in Australia may have peaked.
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Citi Index senior market analyst Matt Simpson noted: “There is some technical support around $0.6520, which the bears are hesitant to break. However, he added, “However, the jobs report does not provide any significant reason to be long the AUD,” Accordingly, the next move depends on the expectations of the Fed and the US dollar.
In particular, employment in Australia experienced a sharp decline in December. Meanwhile, the unemployment rate remained constant due to a decrease in the number of people actively looking for work.
There was a significant decline in net employment of 65,100 in December compared to a revised gain of 72,600 in November. Furthermore, this decline was in contrast to market expectations for an increase of approximately 17,600.
Elsewhere, the US released retail sales data showing an unexpected rise. Strong US retail sales data dampened expectations that the Fed will cut interest rates as early as March. Traders cut the likelihood of a March rate cut to 61%, down from 65.1% on Tuesday. At the same time, Fed officials, including Governor Christopher Waller, are playing down expectations of a quick policy easing. However, the market still expects a reduction of 150 basis points by the end of the year.
AUD/USD key events today
AUD/USD Technical Outlook: 0.6550 looms as a major hurdle
On the technical side, the AUD/USD price found support at the key 0.6550 level after a sharp decline. Although there has been a slight recovery, the bias remains bearish as the price is trading well below the 30-SMA. At the same time, the RSI is in the oversold region.
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However, since the price made such a big swing from the 30-SMA, it could pause or pull back to retest the SMA. Furthermore, price action near the key 0.6550 level supports a reversal. Price made candlesticks with long lower wicks below 0.6550. This shows that the bears have been rejected below this key level. However, a push below this support would see a retest of the key 0.6500 level.
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