The recent spike in unemployment in July has left economists puzzled, with Arch Capital Chief Global Economist Parker Ross suggesting that temporary layoffs may have been a key factor. This has raised concerns about the stability of the labor market and its implications for future job reports. The upcoming August jobs report may shed more light on the situation and reveal whether the layoffs were indeed temporary.
Service Sector Data and its Influence
While the focus is often on unemployment data, investors should also pay attention to service sector data, which plays a significant role in GDP growth. Economists are expecting a slight dip in the ISM Services PMI for August, which could potentially signal a slowdown in economic growth. A more dovish Fed rate path may lead to increased demand for the AUD/USD pair, while weaker-than-expected numbers could push the pair towards $0.68.
S&P Global Market Intelligence Chief Business Economist Chris Williamson highlighted the solid growth picture in August, suggesting that GDP growth in the third quarter could exceed 2% annualized. However, hiring difficulties are constraining service sector growth, which may lead to elevated input cost inflation. While inflation levels are gradually returning to normal, economic imbalances could still pose a threat to growth.
Investors should closely monitor trade data from Australia, remarks from RBA Governor Michele Bullock, and the US economic calendar for cues on AUD/USD price movements. Positive trade data and hints of an RBA rate hike could propel the pair towards $0.68. However, weaker US economic data and fears of a hard landing could limit gains. It is crucial to stay informed about economic data and central bank commentary to adjust trading strategies accordingly.
The AUD/USD pair is currently trading above the 50-day and 200-day EMAs, indicating a bullish trend. A breakout above $0.67500 may lead to a test of the $0.67967 resistance level, with further upside potential towards $0.68500. On the other hand, a drop below the $0.67003 support level could signal a downward movement towards the 50-day EMA. With the Daily RSI reading at 51.55, the Aussie dollar may have room to rally towards $0.68500 before entering overbought territory.
Recent economic data and external factors are likely to impact AUD/USD price trends in the near future. It is essential for investors to stay abreast of developments in the labor market, service sector, and central bank policies to make informed trading decisions. By closely monitoring real-time data, news updates, and expert commentary, traders can adjust their strategies and manage exposures effectively in the forex markets.