The Australian labour market has been displaying resilience, posing challenges for lower inflation. The recent Consumer Price Index (CPI) data revealed that annual inflation is in line with expectations. However, the sustained strength of the services sector, fueled by a robust jobs market, is preventing a significant decline in inflation. Additionally, annual wage growth in Australia continues to show an upward trajectory, adding to inflationary pressures.
Australia’s economic path has diverged significantly from that of the United States. While the latest US inflation figures indicated a continued decline in core inflation, leading to expectations of a rate cut by the Federal Reserve, Australia’s journey towards adjusting interest rates faces more obstacles. The added liquidity from federal tax cuts and power bill rebates is yet to fully impact the market, prolonging the timeline for any significant policy changes in Australia.
The upcoming Federal Open Market Committee (FOMC) Meeting Minutes on August 21 are expected to provide further insights into the US labour market, economy, and future rate path. Concerns over the labor market and economic outlook could heighten expectations of a 50-basis point rate cut by the Fed in September. Such a rate cut, along with potential cuts in November and December, would narrow the interest rate differential between the US and Australia, potentially supporting a rise in the AUD/USD exchange rate.
Investor sentiment towards the Federal Reserve and Reserve Bank of Australia (RBA) rate paths will play a crucial role in shaping AUD/USD trends. Real-time data, news updates, and expert commentary will be essential for adjusting trading strategies to adapt to changing market conditions. Monitoring key economic indicators, such as services sector PMI and labor market data, will be vital in gauging the likelihood of interest rate cuts and their impact on currency markets.
Technical Analysis and Price Forecast
The AUD/USD pair is currently trading above both the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish trend. A break above the $0.67500 resistance level could pave the way for further gains towards the $0.67967 level. Conversely, a drop below the $0.67003 support level might trigger a downward move towards the 50-day EMA. With the Daily Relative Strength Index (RSI) at 67.06, there is potential for a further bullish momentum towards the $0.67967 resistance level before reaching overbought conditions.
The resilience of the Australian labour market poses challenges for inflation and interest rates, impacting currency exchange rates and investor sentiment. As global economic conditions continue to evolve, staying informed and adapting trading strategies accordingly will be crucial for navigating the volatile financial markets.
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