Following the recent US Job Report, there are expectations of a pickup in hiring which could potentially support wage growth. This increase in wages may lead to higher trends in disposable income, ultimately fueling consumer spending and demand-driven inflation. The net effect of this could result in a higher-for-longer Fed rate path to raise borrowing costs and reduce disposable income for consumers.
While the numbers from the US Job Report need careful consideration, markets will also be looking ahead to the US Consumer Price Index (CPI) Report scheduled for Wednesday. The Fed interest rate decision, economic projections, and press conference will also play a crucial role in shaping investor expectations. Hotter-than-expected inflation numbers could potentially impact the outlook for multiple 2024 Fed rate cuts.
The near-term trends for AUD/USD will largely depend on the outcome of the US CPI Report and the Federal Open Market Committee (FOMC) economic projections. If there are hotter-than-expected US inflation numbers and a more hawkish stance from the Fed, it could tilt the monetary policy divergence towards the US dollar. This, in turn, may have an impact on the AUD/USD exchange rate.
From a technical standpoint, the AUD/USD pair has been hovering above the 50-day and 200-day Exponential Moving Averages (EMAs), sending bullish signals to traders. A move through the $0.66500 handle could potentially support a run at the $0.67003 resistance level. Breaking above this resistance level may bring the $0.67500 handle into play, signaling further bullish momentum.
Australian business confidence numbers and investor sentiment towards the Fed rate path will be important factors to consider in the coming days. However, in a bearish scenario, if the AUD/USD falls through the 50-day EMA, it could open the door for a test of the 200-day EMA and the $0.65760 support level. A further decline below this support level could indicate a move towards the $0.65500 handle.
With a 14-period Daily Relative Strength Index (RSI) reading of 48.64, there is a possibility that the AUD may break below the $0.65500 handle before entering oversold territory. The outcome of the US CPI Report and the Fed’s monetary policy decisions will be crucial in shaping the future trends of the AUD/USD pair. Traders and investors should closely monitor these developments to make informed decisions in the Forex market.