- The AUD/USD forecast indicates increasing expectations for a Fed rate cut.
- The US reported 7.18 million vacancies, compared to the forecast of 7.38 million.
- Market participants are pricing a 97% chance of the Fed cutting in September.
The AUD/USD forecast suggests growing expectations for a Fed rate cut following downbeat US employment figures. However, the dollar paused its decline as market participants awaited the more crucial non-farm payrolls report.
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Data on Wednesday revealed that US job openings fell to a 10-month low in July. There were 7.18 million vacancies, compared to the forecast of 7.38 million. The figures pointed to weak demand in the labor market, which will likely pressure the Fed to lower borrowing costs. After the data, market participants are pricing a 97% chance of the Fed cutting in September. Moreover, some economists are predicting three rate cuts before the end of the year.
James Knightley, ING’s chief international economist, said the Fed is very likely to cut rates meaningfully in the months ahead, with little inflation pressure coming from the jobs market.
“We expect them to cut 25 bp at the September, October, and December FOMC meetings.”
However, the non-farm payrolls report will carry more weight in determining the outlook for rate cuts. Economists believe the economy added 75,000 jobs. Meanwhile, the unemployment rate could increase to 4.3%. A downbeat report could raise expectations for a massive move in September, dragging the dollar down.
AUD/USD key events today
- US ADP non-farm employment change
- US unemployment claims
- US ISM services PMI
AUD/USD technical forecast: 0.6550 resistance holds firm again
On the technical side, the AUD/USD price is pulling back after retesting the 0.6550 key resistance level. It has broken below the 30-SMA while the RSI has dipped below 50, suggesting a bearish bias. However, to confirm a takeover, bears must break below the previous low.
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On a larger scale, AUD/USD is caught in a range between the 0.6425 support and the 0.6550 resistance levels. If bulls manage to break above the range resistance, it will solidify the bullish bias. Moreover, it would allow the price to retest the 0.6620 resistance level.
However, if bears return, the price will likely drop to retest the range support level. A breakout from below would strengthen the bearish bias and allow the price to start a downtrend.
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Saqib Iqbal
