Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Australian Dollar Rally Takes a Breather

Published 11/07/2022, 11:24 AM
Updated 03/05/2019, 07:15 AM

The Australian dollar is almost unchanged today, after sharp gains on Friday. In the North American session, AUD/USD is trading at 0.6470, down 0.02% on the day.

Aussie Soars After Nonfarm Payrolls 

The US dollar declined against all the major currencies on Friday, after a mixed nonfarm payrolls report left investors in a dovish mood. The October reading of 261,000 was down from the previous reading of 315,000 and marked the smallest gain since December 2020. The unemployment rate rose to 3.7%, up from 3.5%, while wage growth rose to 5.5% YoY, up from 5.2%. The latter release is likely to keep the Fed concerned about inflationary pressures.

Investors are expecting that the labor market will continue to soften and that the Fed will lean toward a 50 basis point hike rather than 75 bp, and this sent the dollar sharply lower after the NFP report on Friday. Still, with the Federal Reserve expected to raise rates to 5% or even higher next year, I expect the US dollar to remain attractive to investors.

The RBA is treading carefully, as seen with its modest hike of 0.25% last week. Governor Lowe said that the central bank was on a “narrow path” that required “striking the right balance between doing too much and too little.” The RBA finds itself in a pickle, as its steep tightening cycle is slowing growth and hurting businesses and households. At the same time, inflation remains red-hot at 7.3%, fueled by high food prices. Inflation still remain the RBA’s number one priority, but it has eased up on the size of the hikes, hoping that inflation will peak shortly and a recession can be avoided.

The RBA monetary policy statement was gloomy, with a warning that tough times lie ahead. The central bank is projecting a GDP of 3% over 2022, slowing to 1.5% in 2023. Inflation is expected at 4.75% over 2023, higher than the 4.25% forecast in its previous policy statement. The forecasts are based on the cash rate peaking at 3.5% in mid-2023.

AUD/USD Technical

  • There is resistance at 0.6549 and 0.6631
  • There is support at 0.6411 and 0.6329

AUD/USD Daily Chart

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.