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The AUD/USD reacted to the weak Australian job numbers. According to the statistics agency, the unemployment rate rose from 3.5% in December to 3.7% in January.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6940.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 0.6925 and a take-profit at 0.7000.
- Add a stop-loss at 0.6850.
The Australian dollar crashed to an important level of support amid hawkish sentiments by the Federal Reserve and the Reserve Bank of Australia (RBA). The AUD/USD pair retreated to the important level at 0.6890, the lowest point since February 7. It has declined by ~4% below its highest level this month.
Hawkish Fed and RBA sentiments
The RBA and Fed have maintained their hawkish tone in the past few months. In a statement on Wednesday, Governor Philip Lowe reiterated that the hawkish view was necessary. He attributed this to the fact that high-interest rates have not yet quelled consumer spending.
As such, he supported a more restrictive monetary policy considering that inflation stands at over 7.8%, the highest level in decades. He also warned that failure to hike and maintain rates high would harm consumers even more. Analysts have now penciled in three more hikes, which will bring rates to 4.2%.
The AUD/USD reacted to the weak Australian job numbers. According to the statistics agency, the unemployment rate rose from 3.5% in December to 3.7% in January. The country lost over 11k jobs in January after shedding another 14k in the previous month.
The same view is being shared by the Federal Reserve, which has warned that interest rates will continue rising in the near term. This case has been solidified by the relatively strong economic data from the US. On Wednesday, data showed that retail sales surged by 3% in January after falling by 1.1% in the previous month. Core sales jumped by 2.3%, after falling by 0.9% previously.
These numbers are not the only ones. On Tuesday, the US published important consumer price index (CPI) data, which showed that prices remained stubbornly high in January. Core inflation, which excludes the volatile food and energy prices, dropped marginally on a YoY basis.
And earlier this month, numbers revealed that the unemployment rate continued dropping in January. It fell to a multi-year low of 3.4% as the economy added over 500k jobs.
AUD/USD forecast
The AUD/USD pair has been in a strong bearish trend in the past few weeks and tested the key support level at 0.6892, the lowest point since February 7. It remains below the lower side of the ascending channel while the Relative Strength Index (RSI) moved below 50.
Therefore, the pair will likely continue falling as long as sellers target the key support level at 0.6862, the lowest point on Feb 6. If this happens, the pair will likely continue falling to the key support at 0.6800.
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