Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6645.
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bearish view
- Set a buy-stop at 0.6725 and a take-profit at 0.6810.
- Add a stop-loss at 0.6650.
The AUD/USD exchange rate crawled back as traders reflected on the strong US jobs report published on Friday. The pair was trading at 0.6715 on Monday, higher than last week’s low of 0.6640.
US jobs report and Fed cuts
US jobs report and Fed cutsThe AUD/USD reacted to the better-than-expected American jobs report on Friday. According to the Bureau of Labor Statistics (BLS), the economy added 216k jobs in December, better than the median estimate of 170k.
This was the biggest jump in months, a sign that the labor market is strong. Private payroll numbers rose to 164k, also higher than the median estimate of 130k. The unemployment rate remained at 3.7% while wage growth continued rising. Average hourly earnings rose by 4.1% on a MoM basis after rising by 4.0% in the previous month.
These numbers, coupled with the ongoing trends on inflation, mean that the Federal Reserve will likely maintain high rates for longer. There are chances that inflation will remain steady in the coming months.
The price of crude oil has remained above $77 this month while global shipping rates are on an uptrend. According to Drewry, the World Container Index has surged in the past few days as the crisis in the Middle East has escalated. Therefore, analysts expect the Federal Reserve will start cutting rates in June instead of March as previously thought.
Inflation is also a big issue for the Reserve Bank of Australia (RBA). Economists believe that Australia’s inflation remained at an elevated level in November. The median estimate is that the headline inflation rose by 4.5% in November, higher than the RBA target of 2.0%.
A report published last week showed that Australia’s wages grew by 4.0% in the year to September, the fastest increase since 2009. Therefore, analysts are not ruling out a rate hike later this year.
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AUD/USD technical analysis
The AUD/USD exchange rate bounced back after the latest US Non-Farm Payrolls data. On the four-hour chart, this rebound happened after the pair formed a hammer pattern whose lower side was at 0.6640, which was also the 38.2% retracement level.
The pair remains below the 25-period and 50-period Exponential Moving Averages (EMA). Also, the Relative Strength Index (RSI) has bounced back from 30 to over 40. Therefore, the pair will likely remain on edge on Monday and then resume the downward trend to retest the support at 0.6640.
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