Market Overview

AUD/USD Forecast: Aussie Set to Benefit From Prospects of the Labor Market

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The AUD/USD is supported by the upward sloping trendline after last Friday’s selloff.

The Australian labor market is expected to report the unemployment rate steady at 5.0% in November.

The US Federal Reserve is expected to raise the target range for Fed funds to 2.25%-2.50%, but the monetary policy outlook is in the focus.

The combination of solid Australian labor market report and the Fed possibly pausing in the interest rate hiking cycle should see AUD/USD target 0.7280.

The AUD/USD is trading little changed at around 0.7180 on Monday before the key economic reports are due on Wednesday, December 19. The Australian labor market is expected to create 20.0K new jobs in November after adding 32.8K in the previous month with the unemployment rate stuck to 5.0%. While the outlook for the Australian labor market remains solid, the main driver for the currency pair stems from the outlook for the US monetary policy from the Federal Reserve.

The markets are focusing the attention on Fed outlook with the policymakers possibly signaling the pause to its rate hiking cycle while delivering broadly expected rate hike in December.

The explicit mention of the rate hiking pause would be a strong bullish signal for AUD/USD although such a scenario is not expected. The markets expect Fed to repeatedly underline the conditionality and data dependency for the future policy move.

Technically the AUD/USD is supported by a trendline connecting the cyclical low on AUD/USD at 0.7020 and last Friday’s low of 0.7150. The technical oscillators are pointing higher from below neutral levels and the Slow Stochastics is about to make a bullish crossover in the oversold territory on a daily chart. The AUD/USD is poised to benefit from a solid labor market report and the uncertainty regarding the Federal Reserve’s outlook for monetary policy. The currency pair should, therefore, remain supported by the trendline support heading higher towards 0.7280 representing the immediate target and a 23.6% Fibonacci retracement of a fall from 2018 high of 0.8100 to 0.7020 cyclical low. 

AUD/USD daily chart

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