The deteriorating labor market has the potential to impact wage growth, which in turn could reduce disposable income for consumers. This decrease in disposable income may lead to consumers curbing their spending habits, ultimately dampening demand-driven inflation in the economy.
Effect on Interest Rates
A softer inflation environment resulting from decreased consumer spending could provide the Federal Reserve with the opportunity to discuss potential interest rate cuts. This could have significant implications for the overall monetary policy landscape and impact the exchange rates of currencies such as the AUD/USD.
FOMC Member Commentary
In addition to economic data, it is essential to consider the commentary of Federal Open Market Committee (FOMC) members. For example, remarks from FOMC member Mary Daly could sway investor sentiment regarding the economy, inflation, and the future trajectory of Fed interest rates. This commentary could play a crucial role in shaping near-term trends in the AUD/USD currency pair.
Upcoming trade data from China, US jobless claims, and additional FOMC member speeches will be essential data points to monitor for potential impacts on the AUD/USD exchange rate. It is crucial to pay attention to more hawkish Fed commentary, as it could potentially favor the US dollar in terms of monetary policy divergence.
From a technical analysis perspective, the AUD/USD pair has remained above both the 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bullish price trend. A potential move towards the $0.66 handle could signal a return to the $0.66500 level, with a breakout beyond this point potentially targeting the $0.67003 resistance level.
Conversely, a breach below the $0.65760 support level and the 200-day EMA could indicate a bearish turn for the AUD/USD pair. If the pair breaks below the 50-day EMA, it could suggest a further decline towards levels below $0.65. With the 14-period Daily Relative Strength Index (RSI) reading at 55.32, there is a possibility of the AUD/USD pair rising towards the $0.67003 resistance level before potentially entering overbought territory.
The interplay between labor market trends, inflation data, interest rate decisions, and technical analysis all play a role in shaping the movements of currency exchange rates such as the AUD/USD pair. It is essential for traders and investors to stay informed about these factors to make informed decisions in the foreign exchange market.