AUD/USD at 0.6590 Amid Strong US Jobs Data

AUD/USD at 0.6590 Amid Strong US Jobs Data

Key Points:

  • AUD/USD is at 0.6590, facing key support at 0.6550 and resistance at 0.6625.
  • The Australian Dollar weakened due to strong US jobs data, lowering Fed rate cut expectations.

On Tuesday, the Australian Dollar (AUD) experienced a slight decline as the US Dollar (USD) retained its strength. Robust US jobs data for May exceeded market expectations and attributed to this shift. Strong employment figures reduced the chances of the Federal Reserve cutting interest rates twice in 2024, previously speculated.

According to the CME FedWatch Tool, the probability of a Fed rate cut in September by at least 25 basis points dropped to nearly 49.0%, down from 59.5% a week earlier. This development underscores the USD’s resilience, placing pressure on the AUD.

RBA Hawkish on Rates if CPI Exceeds 1%-3%

Last week, Michele Bullock, the Governor of the Reserve Bank of Australia (RBA), indicated a firm stance on interest rates. Bullock told NCA NewsWire the central bank might hike rates if the CPI stays outside the 1%-3% target range. This hawkish approach by the RBA underscores its commitment to controlling inflation and stabilising the economy. Despite these intentions, the AUD struggled to gain traction against a robust USD.

USD Holds Steady, and Yields Decline for Two Days

On Wednesday, the USD maintained its position despite experiencing two days of falling US Treasury yields. Investor caution prevailed as they awaited the Federal Reserve’s policy decision and key US inflation data. The Fed is expected to keep interest rates steady at 5.25%-5.50%. Meanwhile, analysts estimate that the May US headline and core CPI figures will show 3.4% and 3.5% year-over-year increases, respectively. These expectations have helped the USD hold firm, further pressuring the AUD.

AUD/USD Technicals: 0.6590 with Resistance at 0.6625

The AUD/USD pair is priced at 0.6590, exhibiting a weakening bullish bias. Key support levels are identified at 0.6550, 0.6500, and throwback support at 0.6470. On the resistance side, the 21-day EMA stands at 0.6625, with the lower boundary of the ascending channel at 0.6635, the psychological level at 0.6700, and May’s high at 0.6714. The 14-day RSI hovers slightly below 50, indicating a lack of strong momentum.

US Jobs Data Boosts USD, Pressures AUD/USD

The market sentiment remains cautious as investors navigate the interplay between US economic data and Fed policies. The decline in US Treasury yields suggests a cautious outlook, but the strong US jobs data provides a counterbalance, supporting the USD. For the AUD, the RBA’s potential rate hikes could offer some support, but the prevailing strength of the USD continues to dominate the currency pair’s dynamics.