aud usd rebounds amid us dollar strength and policy uncertainty

IG

The AUD/USD currency pair has rebounded after a five-week losing streak, closing last week at 0.6582, which represents a 0.35% increase. This recovery comes in the midst of uncertainty surrounding US policy following Donald Trump's election victory.

US Policy Uncertainty

The potential tariff and tax reforms that are expected to bolster the US dollar have an unclear timeline, with official announcements anticipated after Trump's inauguration on January 20. This uncertainty poses risks for investors heavily invested in the US dollar.

Stability of the Australian Dollar

Despite the challenges posed by the strength of the US dollar, the Australian dollar has managed to maintain its stability. The recent National People's Congress (NPC) announcement, which provided vague guidance on stimulus measures for housing and consumption, did not have a significant impact on the AUD/USD pair.

Upcoming Labour Force Report

Market participants are now looking forward to the upcoming labour force report, which is expected to provide further insights into the health of the Australian economy and its potential influence on the currency pair. The October labour force report is scheduled for release on November 14 at 11:30 AM AEDT.

Expectations for October

In September, Australia added 64,100 jobs, surpassing expectations. The unemployment rate remained stable at 4.1%, with the participation rate reaching a record high of 67.2%. Preliminary expectations for October suggest a more modest addition of 20,000 jobs, with a projected rise in the unemployment rate to 4.2%. If the unemployment rate increases to 4.3%, it could lead the market to anticipate a rate cut from the Reserve Bank of Australia (RBA) sooner than previously expected. This shift in expectations could have significant implications for the AUD/USD exchange rate.

Technical Perspective

From a technical perspective, the AUD/USD pair has faced challenges in overcoming a multi-month downtrend resistance level. It is currently heading towards a critical trend line support level around 0.6400. The initial resistance for AUD/USD is identified at the 200-day moving average, currently positioned at 0.6630, followed by resistance from last Thursday's spike high of 0.6688. The 50% Fibonacci retracement level of the decline from the September high to last week's low is around 0.6730. Given the prevailing market conditions, it is unlikely for AUD/USD to establish a lasting foothold at these levels.

Volatility and Market Sentiment

The labour force report and further developments in US policy will continue to drive volatility in the AUD/USD currency pair. Investors and traders will closely monitor these indicators to assess the potential direction of the Australian dollar against the US dollar and its implications for broader market sentiment.

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