Following the release of the recent US Job Report, there is speculation about a potential increase in hiring, which could lead to higher wage growth. This, in turn, may result in a rise in disposable income for individuals. As disposable income increases, there is a possibility of a surge in consumer spending, ultimately driving demand and inflation.
The anticipated trends in disposable income and consumer spending could prompt the Federal Reserve to adopt a higher-for-longer rate path. This decision aims to curb borrowing costs and potentially reduce disposable income for consumers. Investors are closely monitoring these developments to gauge the future direction of interest rates.
The AUD/USD exchange rate is likely to be influenced by the upcoming US Consumer Price Index (CPI) Report and the Federal Open Market Committee (FOMC) interest rate decision. A significant increase in inflation numbers could alter investor expectations regarding potential rate cuts by the Federal Reserve in 2024.
From a technical perspective, the AUD/USD pair is currently trading above both the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish market sentiment. A decisive break above the $0.66500 resistance level may pave the way for a rally towards the $0.67003 level, followed by the $0.67500 mark.
Apart from economic indicators, Australian business confidence data and investor sentiment towards the Fed’s rate path will also impact the AUD/USD exchange rate. A negative outlook on these factors could lead to a decline in the currency pair, potentially triggering a test of the 200-day EMA and the $0.65760 support level.
With the 14-period Daily Relative Strength Index (RSI) currently at 48.64, there is a possibility of the AUD/USD pair breaking below the $0.65500 handle. This move could intensify selling pressure, potentially pushing the exchange rate towards oversold territory.
The US Job Report has set the stage for significant developments in the AUD/USD market. As investors await key economic data and central bank decisions, the currency pair is likely to experience heightened volatility in the coming days. Traders should closely monitor technical levels and fundamental indicators to make informed trading decisions amidst uncertain market conditions.