- Investors shunned risky assets on Friday amid fears of an escalating Middle East war.
- In March, Australians lost 6,600 jobs.
- Markets are giving a 65% chance of the first RBA rate cut in December.
The AUD/USD outlook takes a bearish turn as the risk-sensitive Aussie fluctuates following disturbing reports of Israel’s attack on Iran. Moreover, the currency is struggling with the fallout from a poor jobs report.
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Investors shunned risky assets on Friday amid fears of an escalating Middle East war. Notably, there have been reports of Israel retaliating after a recent attack by Iran. As a result, investors were worried that the war could worsen. This sent them into more traditional haven currencies such as the yen and the Swiss franc. Meanwhile, risk-sensitive currencies such as the Aussie and the Kiwi suffered. Although the move was harsh, it soon backfired, as Iran denied reports of the attack.
At the same time, investors were rattled by poor employment reports from Australia. In March, Australians lost 6,600 jobs, a sharp reversal from February’s hit. Meanwhile, the unemployment rate rose to 3.8%. Such a lack of employment should have increased expectations of a rate cut.
However, the Reserve Bank of Australia’s tapering remains a long way off. The easing in the labor market is a relief for the central bank, but it is slow. Therefore, the markets are giving a 65% chance of the first rate cut in December.
This outlook keeps the RBA behind the Fed as markets expect the first US tapering in September. However, the outlook for monetary policy is constantly changing with incoming data.
AUD/USD key events today
Traders will focus on developments in the Middle East war as no key reports come out of Australia or the US.
AUD/USD Technical Outlook: A large wick signals a rejection below 0.6400
On the technical side, the AUD/USD price is in a downtrend, with the price trading below the 30-SMA and the RSI almost oversold. However, the decline was stopped at the critical support level of 0.6400. The bears tried to break below this level but failed when the price reversed and made a big fuse. This is a sign that the bulls have rejected a move lower.
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However, given the bearish bias, the price could make another attempt to break below. If it fails, it could pull back to retest the 30-SMA resistance before targeting the key 0.6350 level.
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