On Thursday, July 18th, the Australian dollar / US dollar rose in the short term, reaching 0.67364. The unemployment rate in Australia in June is expected to remain unchanged at 4%, and employment is steadily increasing. The economy will create 20,000 new jobs in June. Technical analysis believes that under the currency policy divergence, the bulls of the Australian dollar / US dollar will continue to move towards 0.700.
The peak of Australia's unemployment rate in April reached 4.1%, which was the same as the reading in January and the highest level since 2022. The rise in unemployment usually means a loose labor market, allowing the central bank to lower interest rates.
However, the Reserve Bank of Australia kept the cash rate at 4.35% unchanged at its June meeting and did not seem to be in a hurry to cut interest rates. It is worth reminding that the bank's responsibility is to promote currency stability, full employment, economic prosperity and well-being of the Australian people.
Considering this, a decrease in the unemployment rate and stable employment growth will be seen as tightening of the labor market, which means that possible rate cuts will be postponed. In fact, the stronger the labor market, the greater the possibility of a rate hike.
Considering the risks posed by the latest situation to economic growth, it is unlikely that this situation will occur, but speculative interests have not completely ignored the possibility of interest rate hikes. Regarding interest rate cuts, bets are still continuing, and the first interest rate cut in Australia is expected to be in 2025.
Later on Thursday, the continuous application for unemployment benefits in the United States will attract investors' attention.
Economists predict that the continuous application for unemployment benefits will increase from 1.852 million people in the week ending June 29th to 1.855 million people in the week ending July 6th.
Higher claims may raise speculation about the Fed's interest rate cut in July and multiple interest rate cuts in 2024.
Signs of a worsening labor market in the United States and a more moderate Fed rate path will support the Australian dollar / US dollar to rise to 0.700 US dollars. Multiple Fed rate cuts will narrow the interest rate differential, which is bullish for the Australian dollar.
Parker Ross, Chief Economist of Arch Capital Global, commented on the US unemployment benefit application report as of the week ending June 29th. He said: "Continued unemployment benefits still reflect a more significant weakness in the labor market."
Fed Chairman Powell admitted that the labor market situation has turned soft before testifying on Capitol Hill.
The short-term trend of the Australian dollar / US dollar depends on Australian and US labor market data. A decrease in the Australian dollar unemployment rate may give the green light for the Australian central bank to raise interest rates. Conversely, an increase in continuous unemployment benefit applications may increase bets on Fed rate hikes in July. Currency policy divergence may lean towards the Australian dollar, and it is expected that the Australian dollar / US dollar will rise to 0.700.
Technical analysis of the Australian dollar/US dollar
FXEmpire analyst Bob Mason said that the steady breakthrough of the 50-day and 200-day EMA of the Australian dollar / US dollar confirms the bullish price trend.
The Australian dollar / US dollar broke through the $ 0.67500 mark, and may push the bulls towards the $ 0.67967 resistance level. In addition, breaking through the $ 0.67967 resistance level may push towards the $ 0.68500 mark.
On the contrary, if the Australian dollar / US dollar falls below the support level of $ 0.67003, it may indicate a decline to the 50-day moving average.
The 14-day daily RSI reading is 56.30, and the Australian dollar may break through the $ 0.67967 resistance level and then enter the overbought area.
(Source: FXEmpire)