Investing.com - The Australian dollar rallied more than 1% against its U.S. counterpart on Friday, after disappointing U.S. nonfarm payrolls data increased speculation that the Federal Reserve will slow the pace of cuts to monetary stimulus.
AUD/USD rose to 0.9005 on Friday, the pair’s highest since December 12, before subsequently consolidating at 0.8996 by close of trade, up 1.1% for the day and 0.36% higher for the week.
The pair is likely to find short-term support at 0.8874, the low from January 10 and resistance at 0.9080, the high from December 12.
The U.S. economy added 74,000 jobs in December, the Labor Department said, the smallest increase since January 2011 and well below expectations for 196,000 new jobs.
The unemployment rate fell to a five-year low of 6.7% from 7% in November, but this was due in part to people dropping out of the labor force. The labor participation rate fell to an almost 35-year low of 62.8%.
The disappointing data tempered expectations that the Fed would cut its stimulus program again this month. The central bank cited a stronger labor market in its decision to taper its asset purchase program by USD10 billion in December to USD75 billion-a-month.
Minutes of the Fed’s December meeting released earlier in the week showed that officials were keen to stress that further reductions in stimulus were not on a “preset course” and would be undertaken in “measured” steps. The central bank is scheduled to meet January 28-29 to review the economy and assess policy.
Market players shrugged off data showing that China's trade surplus narrowed to USD25.6 billion in December, from USD33.8 billion the previous month, compared to expectations for a surplus of USD31.1 billion. The Asian nation is Australia’s largest trade partner.
The CFTC Commitments of Traders report for the week ending January 7 showed that speculators have been aggressively shorting the Australian dollar. Gross shorts totaled 56,892 contracts as of last week.
In the week ahead, investors will be closely watching U.S. data on retail sales, inflation and consumer sentiment, as well as speeches by two Federal Reserve officials on Tuesday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, January 13
Australia is to publish data on the number of new home loans granted, a strong indicator of demand in the housing market.
Tuesday, January 14
The U.S. is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The nation is also to release data on import prices and business inventories.
Also Tuesday, Federal Reserve Bank of Philadelphia President Charles Plosser and Dallas Fed President Richard Fisher are to speak.
Wednesday, January 15
Australia is to publish data on new vehicle sales, a leading indicator of consumer confidence.
The U.S. is to release data on producer price inflation and a report on manufacturing activity in the New York region.
Thursday, January 16
Australia is to publish data on the change in the number of people employed and the unemployment rate, as well as a private sector report on inflation expectations.
The U.S. is to publish reports on consumer price inflation and initial jobless claims, in addition to data on manufacturing activity in Philadelphia. Meanwhile, Federal Reserve Chairman Ben Bernanke is to speak at an event in Washington.
Friday, January 17
The U.S. is to wrap up the week with the closely watched preliminary reading of the University of Michigan consumer sentiment index. The U.S. is also to release data on building permits, housing starts and industrial production.