AUD/USD dropped close to 100 points in the Asian session but has recovered and is trading in positive territory.
Australia’s labour market remains solid
Australia released September’s employment report earlier Thursday, which indicated that the labour market remains robust. The economy added 13,300 full-time jobs, with a decline of 12,400 part-time jobs. This follows a superb gain of 55,000 jobs in August.
The strong domestic economy, in particular the labour market, has contributed to rising inflation, forcing the Reserve Bank of Australia to continue raising rates. The RBA surprised the markets with a small rate hike of 0.25% at its October meeting, which was smaller than expected. At the meeting, the RBA noted that inflation remains too high, but the modest rate hike fits in with that the central bank’s projection that inflation will peak in early 2023. The RBA meets on Nov. 1, with the release of the September inflation report just a few days prior. The inflation data will likely be a major factor in the RBA’s rate decision.
The Australian dollar has hit hard times. Since Aug. 1, AUD/USD has plunged 550 points, as risk sentiment has taken a beating and the Federal Reserve’s aggressive tightening has boosted the US dollar. China’s economy has been struggling and the escalation of the Ukraine conflict, with no end in sight, has sapped the appetite for risk-related currencies like the Australian dollar. With the Fed expected to remain aggressive for the remainder of 2023 and China and Ukraine likely to remain hotspots, there is room for the Aussie to continue to head south.
AUD/USD Technical
- AUD/USD tested support at 0.6250 earlier today. The next support level is 0.6121
- There is resistance at 0.6331 and 0.6460