The Australian Dollar (AUD) continues its upward momentum against the US Dollar (USD), trading around 0.6750 on Thursday, as it recovers from earlier losses. The recent strength in the AUD is driven by better-than-expected labor market data from Australia and the ongoing market reaction to the Federal Reserve’s 50 basis points (bps) interest rate cut on Wednesday.
Australian Labor Market Remains Resilient
Australia’s Employment Change came in at 47.5K for August, slightly down from the previous month’s 58.2K but significantly above market expectations of 25.0K. The Unemployment Rate remained steady at 4.2%, aligning with forecasts and the previous month’s reading. This robust labor market performance continues to support the Australian Dollar, bolstering the argument for a resilient economy despite global economic uncertainties.
Fed’s Rate Cut and Market Implications
The Federal Open Market Committee (FOMC) lowered the federal funds rate to a range of 4.75% to 5.0%, marking its first rate cut in over four years. Fed Chair Jerome Powell emphasized that the decision reflects confidence in maintaining a strong labor market while aiming for moderate economic growth and bringing inflation down to the Fed’s 2% target. This move by the Fed has led to a softer USD, providing additional support to the AUD.
China’s Economic Concerns and PBoC‘s Upcoming Meeting
Attention is also turning to the People’s Bank of China (PBoC) Monetary Policy Committee meeting on Friday, where policymakers are set to review the loan prime rate (LPR). Recent downgrades in China’s growth forecasts and ongoing economic challenges have created a cautious environment for the AUD, given its sensitivity to China’s economic health.
Market Sentiment and Technical Outlook
Market sentiment has been buoyed by strong consumer confidence data, with the ANZ-Roy Morgan Australian Consumer Confidence Index reaching an eight-week high of 84.1, although it remains in pessimistic territory. In the US, the University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, beating expectations and marking a four-month high, reflecting improving economic perceptions.
Technical Analysis: Key Levels to Watch for AUD/USD
The AUD/USD pair is trading near 0.6750, positioned just below the lower boundary of a rising wedge pattern, which signals potential for a bearish reversal. However, the 14-day Relative Strength Index (RSI) is slightly above 50, suggesting that a decisive break below the nine-day Exponential Moving Average (EMA) at 0.6733 is needed to confirm further downside.
Upside Levels: The pair could test the seven-month high at 0.6798, with further resistance at the 0.6810 level (lower boundary of the rising wedge) and 0.6840 (upper boundary of the wedge). A move back into the rising wedge would reaffirm the bullish trend.
Downside Levels: Initial support lies at the nine-day EMA at 0.6733, followed by the key psychological level of 0.6700. A break below 0.6700 could open the door to a deeper correction towards the throwback support zone around 0.6575.
Outlook
The AUD’s performance will be closely tied to further economic data releases and central bank communications. A resilient labor market and a dovish Fed stance provide tailwinds, but uncertainties surrounding China’s economy and the PBoC’s policy response could influence near-term price action. Investors should monitor these key levels and upcoming economic events to gauge the next direction for the AUD/USD pair.
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