Australian Dollar gains ground following solid employment data

• The Australian Dollar receives support following the release of the Aussie labor figures on Thursday.

• Australia’s Employment Change increased by 64.1K in September, bringing the total employment to a record 14.52 million.

• Traders anticipate the US Retail Sales data, with expectations for a 0.3% increase MoM in September, up from 0.1% prior.

The Australian Dollar (AUD) halts its three-day losing streak against the US Dollar (USD) after a strong Australian employment report was released on Thursday. The seasonally adjusted Employment Change in Australia surged by 64.1K in September, bringing the total employment to a record 14.52 million. This far surpassed market expectations of a 25.0K increase, following a revised rise of 42.6K in the previous month.

Meanwhile, Australia's seasonally adjusted Unemployment Rate remained steady at 4.1% in September, matching the revised figure for August and coming in lower than the anticipated 4.2%. The number of unemployed individuals decreased by 9.2K, down to 615,700.

The US Dollar (USD) found support from strong labor and inflation data, which has tempered expectations for aggressive easing by the Federal Reserve (Fed).

Traders are keenly awaiting the US Retail Sales data, set to be released later in the North American session. Expectations are for monthly consumer spending to increase by 0.3% in September, up from 0.1% in the previous reading.

Daily Digest Market Movers: Australian Dollar appreciates due to solid labor report

According to the CME FedWatch Tool, there is currently a 92.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction.

Reserve Bank of Australia (RBA) Deputy Governor Sarah Hunter reiterated on Wednesday the central bank's commitment to curbing inflation, emphasizing that although inflation expectations remain well-anchored, ongoing price pressures continue to present significant challenges.

On Tuesday, Federal Reserve Bank of Atlanta President Raphael Bostic stated that he anticipates just one more interest rate cut of 25 basis points this year, as reflected in his projections during last month's US central bank meeting. "The median forecast was for 50 basis points beyond the 50 basis points already implemented in September. My projection was for an additional 25 basis points," he said, according to Reuters.

The Australian weekly survey of Consumer Confidence showed little movement, with the ANZ-Roy Morgan Consumer Confidence index remaining steady at 83.4 this week. Despite the unchanged figure, the longer-term trend shows that Consumer Confidence has been below the 85.0 mark for a record 89 consecutive weeks. The current reading is 1.3 points higher than the 2024 weekly average of 82.1.

Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari reassured markets on Monday by reaffirming the Fed's data-dependent approach. Kashkari reiterated familiar Fed policymaker views on the strength of the US economy, noting continued easing of inflationary pressures and a robust labor market, despite a recent uptick in the overall unemployment rate, per Reuters.

The Commonwealth Bank of Australia indicated expectations that the Reserve Bank of Australia will implement a 25 basis point rate cut by the end of 2024. The report suggested that a stronger disinflationary trend than the RBA anticipates is essential for the Board to consider easing policy within this calendar year.

The National Bureau of Statistics of China reported that the country's monthly Consumer Price Index (CPI) remained unchanged at 0% in September, down from August's 0.4% increase. The annual inflation rate rose by 0.4%, falling short of the anticipated 0.6%. Additionally, the Producer Price Index (PPI) decreased by 2.8% year-on-year, a larger drop than the previous decline of 1.8% and exceeding expectations of a 2.5% decrease.

Technical Analysis: Australian Dollar tests 0.6700, upper boundary of a descending channel

The AUD/USD pair hovers around 0.6700 on Thursday. An analysis of the daily chart shows the pair testing the upper boundary of a descending channel. If it successfully breaks above this channel, it could signal a shift in momentum from bearish to bullish. However, bearish sentiment remains dominant with the 14-day Relative Strength Index (RSI) still below 50.

On the downside, the AUD/USD pair could target its eight-week low of 0.6622, last touched on September 11. A break below this level might lead to further declines, with the next target being the descending channel's lower boundary near the psychological support level of 0.6580.

In terms of resistance, a breakout above the descending channel could bring the nine-day Exponential Moving Average (EMA) around 0.6729 into focus, followed by the key psychological barrier level at 0.6800.

AUD/USD: Daily Chart