However, the September employment report raised concerns about the resilience of the labor market. While the Australian unemployment fell from 3.7% to 3.6%, the participation rate declined from 67.0% to 66.7%.
Economists forecast the participation and unemployment rates to hold steady at 67.0% and 3.7%.
According to the ABS,
- Employment increased by 6,700, following a 64,900 rise in August.
- Full employment declined by 39,900, reversing a 2,800 increase in August.
- Monthly hours worked in all jobs declined by 0.4%, while up 2.9% year-over-year.
Australian inflation figures for August left the door open for an RBA rate hike. The September employment figures may give the RBA reason to leave rates unchanged. The participation rate will raise eyebrows and suggest weaker labor market conditions despite the unemployment rate.
Weaker labor market conditions impacts wage growth and consumption outlook. A downward trend in consumer spending would subdue demand-driven inflation, easing pressure on the RBA to hike rates.
Fed Chair Powell and US Jobless Claims in the Spotlight
US initial jobless claims for October 14 will draw investor interest on Thursday. US labor market conditions remain robust, supporting wage growth and consumer spending.
An upward trend in consumption fuels demand-driven inflationary pressures, leaving pressure on the Fed to curb spending. A higher-for-longer interest rate path would impact borrowing costs and disposable incomes, forcing consumers to curb spending.
Other statistics to consider include Philly Fed Manufacturing and housing sector data. However, the numbers may play second fiddle to the Fed.
Fed Chair Powell and FOMC members Philip Jefferson, Raphael Bostic, Patrick Harker, Michael Barr, and Austan Goldsbee are on the calendar to speak. Support for a Fed rate hike to tackle consumption would pressure the AUD/USD.
However, news updates regarding the Middle East conflict also require consideration. An escalation in the conflict would drive demand for the safety of the US dollar.
Australian labor market conditions and elevated inflation send mixed signals to the RBA. However, a resilient US economy and the threat of an escalation in the Middle East conflict remain tailwinds for the US dollar.
AUD/USD Price Action
The AUD/USD sat below the 50-day and 200-day EMAs, sending bearish price signals.
A fall below the $0.63 handle would bring the trend line and $0.62749 support level into play. However, the buying appetite will likely intensify at $0.62750. The trend line is confluent with the resistance level.
Fed speeches and the Middle East conflict will be focal points on Thursday.
An AUD/USD return to $0.63500 would support a break above the $0.63854 resistance level to target the 50-day EMA.
Dovish Fed commentary and a de-escalation in the Middle East would support demand for the Aussie dollar.
A 14-period Daily RSI reading of 41.85 indicates an AUD/USD drop below the trend line before entering oversold territory (typically below 30 on the RSI scale).