• Australian employment experienced a sharp decline in December.

• The US reported robust retail sales in December.

• Traders have reduced the likelihood of a first Fed rate cut by March to 61%.

The AUD/USD outlook shows a hint of bearish momentum, with the Australian dollar dipping by as much as 0.04% due to lower-than-expected December employment data. As a result, there is speculation that interest rates in Australia might have peaked.

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City Index’s senior market analyst, Matt Simpson, noted, “There’s some technical support around $0.6520, which bears are hesitant to breach.” However, he added, “Yet the jobs report doesn’t provide any meaningful reason to be long AUD,” Consequently, the next move depends on Fed expectations and the US dollar.

Notably, Australian employment experienced a sharp decline in December. Meanwhile, the jobless rate remained constant due to a decrease in people actively seeking employment.

There was a significant drop of 65,100 in net employment for December compared to the revised surge of 72,600 in November. Moreover, this decline contrasted with market expectations of an increase of approximately 17,600.

Elsewhere, the US released data on retail sales showing an unexpected surge. The robust US retail sales data reduced expectations that the Fed would lower interest rates as soon as March. Traders have reduced the likelihood of a March rate cut to 61%, down from 65.1% on Tuesday. At the same time, Fed officials, including Governor Christopher Waller, are pushing back against expectations of quick policy easing. However, the market still expects 150 basis points of cuts by the end of the year.

AUD/USD key events today

• US unemployment claims

AUD/USD technical outlook: 0.6550 emerges as a formidable barrier

On the technical side, the AUD/USD price has found support at the 0.6550 key level after a sharp decline. Although there has been a small recovery, the bias remains bearish as the price trades well below the 30-SMA. At the same time, the RSI is in the oversold region.

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However, since the price made such a big swing from the 30-SMA, it might pause or pull back to retest the SMA. Moreover, price action near the 0.6550 key level supports a reversal. The price has made candlesticks with long bottom wicks below 0.6550. This shows that bears have been rejected below this key level. Still, a push below this support would lead to a retest of the 0.6500 key level.

https://www.forexcrunch.com/blog/2024/01/18/aud-usd-outlook-aussie-dips-after-employment-drop/