AUD/USD faces downward pressure: global and domestic factors weigh as NAB business confidence survey looms
AUD/USD sees a third weekly decline, impacted by global pressures and weak employment data. The NAB Business Confidence survey takes center stage amidst ongoing risk sentiment and key economic events.
Last week saw a third consecutive weekly fall for the AUD/USD, as a combination of global and domestic events supported the US dollar and undercut support for the Australian dollar.
To recap, last week.
- Employment in Australia fell by 65.1k jobs in December, well below the 15k gain expected. The unemployment rate remained unchanged at 3.9% due to a significant drop in the participation rate from 67.1% to 66.8%, which often occurs when those discouraged stop looking for work. Hours worked fell for a second consecutive month.
- While China's GDP growth picked up to 5.2% y/y in Q4 2023 from 4.9% in Q3, the increase was largely due to base effects. Notably, sequential growth slowed to 1% q/q in Q4 from 1.5% in Q3 despite a host of easing measures by the government.
- Fed Waller's speech was less dovish than expected. Waller expressed a keen interest in seeing more progress on the inflation front and preferred a slower pace of cuts than in previous cycles.
In a holiday-shortened week, the only local economic event of note will be the NAB Business Confidence survey released on Tuesday morning, previewed below, with the key drivers of the AUD/USD more likely to be risk sentiment, the outcome of central bank meetings in Japan and Europe as well as inflation data in the US.
NAB Business Confidence survey (Thursday, January 18th at 11.30 am AEST)
The NAB Business Confidence survey index dived to -9 in November, the lowest print outside the Covid period since 2012.
The market consensus is for a marginal rise to -7 in December. Within the sub-indices, employment and pricing intentions will be the focus, which were both on the firm side of things in November.
Australian business confidence chart
AUD/USD technical analysis
From the October .6270 low to the December .6871 high, the AUD/USD gained just under 10% in two months. The rally appears to have unfolded in five waves (Elliott Wave), which suggests the pullback from the .6871 high is part of a correction rather than a reversal lower.
This view is supported by the AUD/USD last week holding and bouncing from the strong layer of horizontal support at .6520/00, noted in last week's update, which also includes the 61.8% Fibonacci retracement of the October to December rally at .6500c.
Therefore, leaning against support at .6520/00, a positive bias is in place, looking for a rebound initially towards resistance at .6700/25. Aware that if a sustained break of .6520/00 were to occur, it would warn that a deeper decline is unfolding towards 6400c.
AUD/USD daily chart
- Source: TradingView. The figures stated are as of 22 January 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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