Highlights

  • It is a busy morning for the AUD/USD, with employment numbers for June in focus.
  • After the RBA meeting minutes, tighter labor market conditions would fuel bets of further RBA rate hikes.
  • The near-term technical indicators turned bearish but will hinge on the employment numbers.

On Wednesday, the AUD/USD fell by 0.59% to end the day at $0.67713. Market sentiment toward the Chinese economy and US soft landing bets weighed on buyer appetite.

While the RBA minutes revealed the willingness to push the cash rate higher, Board members also expected inflation to soften and capacity pressures to ease, which could remove the need for further action.

This morning, employment numbers for June could decide the fate of the next RBA interest rate decision. A larger-than-expected rise in employment and an unexpected fall in the unemployment rate would support another rate hike.

Economists forecast employment to increase by 17.0k and the unemployment rate to remain at 3.6%.

Tight labor market conditions lead to a pickup in wage growth due to a lack of skilled labor. Wage growth translates into increased spending power that drives demand for goods and services, straining supplies and leading to increased price pressure.

Ahead of the employment numbers, the PBoC will set the mood. However, economists expect the PBoC to leave the 1-year and 5-year loan prime rates unchanged at 3.55% and 4.20%, respectively. Recent economic indicators from China have fueled bets on Beijing delivering a sizable stimulus package to boost economic activity. However, another cut in loan prime rates may not be enough.

The US Session

US jobless claims and the Philly Fed Manufacturing Index will move the dial. However, with the US manufacturing sector contracting for the eighth consecutive month in June, according to the ISM survey, the jobless claims will likely have more impact.

Upbeat numbers would support the theory of a soft landing. However, tighter labor market conditions would also pressure wage growth. Increasing demand for goods and services would push the prices for goods and services higher.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD fall through the psychological $0.68 support level on Wednesday to test the upper level of the $0.6755 – $0.6729 support band.

Notably, the AUD/USD remained above the 50-day ($0.67164) and 200-day ($0.67514) EMAs, signaling bullish momentum over the near and longer-term time horizons.

Despite four consecutive days in the red, the 50-day EMA closed in on the 200-day EMA, supporting the bullish nearer-term outlook.

Looking at the 14-Daily RSI, the 53.74 reading signals a bullish trend and supports a move through $0.68 to target the $0.6878 – $0.6905 resistance band. However, a fall through the upper level of the $0.6755 – $0.6729 support band and the 200-day EMA ($0.67514) would bring the 50-day EMA ($0.67164) into play.

AUDUSD 200723 Daily Chart

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD finds support at the upper level of the $0.6755 – $0.6729 support band. After the bearish Wednesday session, the AUD/USD fell through the 50-day EMA ($0.67739). However, the AUD/USD remains above the 200-day EMA ($0.67214), sending bearish near-term but bullish longer-term signals.

Significantly, the 50-day EMA narrowed on the 200-day EMA, supporting a look at the 200-day EMA ($0.6729). The AUD/USD must avoid the $0.6755 – $0.6729 support band to break out from the 50-day EMA ($0.67739) and retarget $0.68.

Looking at the RSI indicator, the 14-4H RSI reading of 41.51 indicates bearish momentum, with selling pressure outweighing buying pressure. The RSI is aligned with the 50-day EMA and supports a run at the 200-day EMA ($0.67214).

AUDUSD 200723 4 Hourly Chart

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By admin