AUD/USD’s rebound under review as markets weigh policy impacts

AUD/USD bounces back despite US dollar strength on Trump win

AUD/USD staged a recovery last week, closing higher at 0.6582 (+0.35%) and breaking a five-week losing streak that saw it drop 4.8% in October. This rebound occurred despite Donald Trump’s election victory, which is expected to further strengthen the US dollar through potential tariff and tax policies.

However, the timing of these policy announcements remains uncertain, likely occurring after his inauguration on 20 January. This creates some risk for those heavily invested in the US dollar while awaiting official updates.

AUD currency holds steady amid mixed signals

In the meantime, the Australian dollar found support following last Tuesday's hawkish Reserve Bank of Australia (RBA) interest rate hold, in contrast to the dovish tone from the Federal Reserve (Fed) on Thursday.

This support also helped AUD/USD withstand disappointment following Friday’s National People’s Congress (NPC) announcement, which provided only vague guidance, suggesting modest stimulus for housing and consumption.

The next significant move for AUD/USD will likely depend on Thursday’s labour force report, previewed below.

October labour force report preview

Date: Thursday, 14 November at 11.30am AEDT

In September, the Australian economy added 64,100 jobs, significantly beating the 25,000 gain anticipated by the market. The unemployment rate held steady at 4.1%, with the participation rate rising to a record high of 67.2%.

Bjorn Jarvis, head of labour statistics at the Australian Bureau of Statistics (ABS), stated: 'With employment rising by around 64,000 people and the number of unemployed falling by around 9000, the unemployment rate remained at 4.1 per cent, where it has generally been over the past six months.'

Last month’s strong employment data marked the seventh time in eight months that job growth exceeded forecasts. In the RBA’s statement accompanying last week’s rate hold decision, the bank noted that 'labour market conditions remain tight, and while conditions have been easing gradually, some indicators have recently stabilised.'

The preliminary expectations for October suggest the Australian economy will add 20,000 jobs, with the unemployment rate expected to rise to 4.2%. Should the rate increase to 4.3%, it may prompt the market to bring forward a 25 basis point (bp) RBA rate cut to February from the current projection of July.

AU unemployment rate chart

AUD/USD technical analysis

AUD/USD rejected multi-month downtrend resistance at 0.6900 - 0.6910c in late September, originating from the 0.8007 high of February 2021 and the 1.1081 high from July 2011. It appears to be heading towards multi-month trend line support around 0.6400c.

AUD/USD monthly chart

Based on the monthly chart above, and following the extended decline from the September high of 0.6942, we expect sellers to re-emerge on any bounces, with AUD/USD potentially heading to 0.6400c.

Initial resistance is seen at the 200-day moving average at 0.6630, followed by resistance from last Thursday's spike high of 0.6688. The 50% Fibonacci retracement of the decline from the September 0.6942 high to last week's 0.6512 low is around 0.6730.

It would be surprising if AUD/USD were to make a lasting impression at this level.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 11 November 2024. 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.}