AUD/USD: towards an increase in the RBA interest rate


Today, the Australian dollar was among the leaders of growth on the market. It strengthened in response to the publication of data on the Australian labor market at the beginning of today's Asian session. The Australian Bureau of Statistics (ABS) reported that unemployment in December fell to its lowest level since 2008 4.2%. This turned out to be significantly better than the forecast of 4.5% and the previous value of 4.6%. Unemployment in the country began to gradually decline from July 2020. Then it was 7.5%, and its growth accelerated against the backdrop of massive closures of enterprises in the country due to restrictive quarantine measures. Now we see that as the situation with coronavirus improves in the country, the situation in the labor market also improves.

Earlier, the head of the RBA, Philip Lowe, repeatedly stated that one of the criteria for when the RBA would consider tightening its monetary policy would be reduce unemployment to below 4.5%. And now the downward trend in unemployment suggests the possibility that it will soon drop to levels not seen since the 1970s. This, economists believe, will push the Reserve Bank of Australia to radically correct the leading indication of the timing of interest rate hikes, shifting them from the end of 2023 to the current year 2022, and possibly to its middle. And this is a positive factor for the Australian dollar. Usually, other things being equal to the average, the quotes of the national currency rise in response to the actions of the country's central bank aimed at tightening monetary policy.

Thus, during today's Asian session, the Australian dollar strengthened quite sharply against the US dollar. The AUD/USD jumped to an intraday and 4-day high of 0.7256. Then it weakened a little, but its upward corrective momentum (within the global downtrend) is preserved. At the time of writing this article, AUD/USD is traded above the important short-term and medium-term support at 0.7215 (200-period moving average on the 1-hour, 4-hour charts and 50-period moving average on the daily chart. However, it is still necessary to have due to the fact that AUD / USD remains in the bearish long-term market, trading below the key resistance levels 0.7310, 0.7335.

A breakdown of the local support level 0.7170 will indicate the resumption of the bearish trend in AUD/USD.

And today, market participants will pay attention to the publication at 13:30 (GMT) of weekly data on the US labor market. They are expected to point to a decline in initial jobless claims to 220,000 after their unexpected rise to 230,000 the week before last. Still, this is a low number of jobless claims. It remains at the lowest level for several decades - about 200 thousand. This is a positive factor for the dollar, after it became clear from the recent report of the US Department of Labor that unemployment in the country is at the minimum pandemic and multi-year level of 3.9%.

If the data turns out to be better than the forecast, then the US dollar should strengthen in the short term.

Also at the same time (13:30) the Philadelphia Fed will publish the PMI index of business activity in the manufacturing sector. The index reflects trends in the manufacturing sector of this Pennsylvania county and is linked to the overall ISM PMI index. The higher-than-expected result (19.8 against the previous value of 15.4) will also have a positive impact on the USD.