- There was an unexpected jump in employment in Australia in June.
- Investors have increased the likelihood of an RBA rate hike in August from 12% to 20%.
- Investors are fully pricing in a rate cut at the Fed’s September meeting.
The AUD/USD forecast remains bearish. However, the pair managed to bounce back a bit after a mixed job report in Australia. This week, the currency’s downtrend continued despite growing expectations of a Fed rate cut.
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Data on Thursday showed the Australian economy added 50,200 jobs in June, beating forecasts of 20,000. However, the unemployment rate also rose from 4.0% to 4.1%, giving a mixed picture of the labor market.
However, demand in the Australian labor market remains strong. Accordingly, following the report, investors increased the likelihood of an RBA rate hike in August from 12% to 20%. At the same time, the markets expect that the first rate will be reduced already in the next year. The next big report will be the Consumer Price Index later this month. Inflation could pick up, which could increase bets for a rate hike.
Meanwhile, the opposite is happening in the US, where policymakers are gaining confidence that inflation will reach the 2% target. At the same time, data on Tuesday revealed that the economy remains on solid ground, with retail sales beating forecasts. Therefore, the Fed could achieve a soft landing with inflation reaching its 2% target without a recession.
Furthermore, investors are fully pricing in a rate cut at the Fed’s September meeting. Policy outlooks between Australia and the US differ. The Fed could start tapering soon while there is still the risk of a rate hike by the RBA.
AUD/USD key events today
On the technical side, the AUD/USD price is in a downtrend, trading below the 30-SMA resistance. At the same time, the RSI is sitting just below 50, supporting bearish momentum. The trend recently reversed when the bulls failed to reach the key level of 0.6800.
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Bears took control when price broke below the 30-SMA and the bullish trend line. The sharp decline then paused to retest the trend line before continuing lower. However, the bears still haven’t found their foothold below the SMA. Price now needs to make lower and lower lows to confirm the bearish trend. Therefore, it may retest the 0.6700 key support level soon.
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