Australian Labor Market Surges in November Amid Economic Uncertainty

In November, Australia's labor market demonstrated unexpected growth, with employment increasing by 61,500 individuals, surpassing expectations of 11,000. The record-high participation rate of 67.2% indicated a robust demand for skilled workers. However, despite these gains, certain indicators suggested a cooling in the labor market.

Australia's strong employment growth, at 3.2% for the year to November, suggesting the labor market wasn't the primary driver of inflation. The RBA, despite keeping rates steady at 4.35%, warned of potential inflation risks, leaving the door open for further rate hikes.

The unexpected uptick in the unemployment rate from 3.8% to 3.9% and a stagnation in the growth of monthly hours worked hinted at a moderation in the labor market's strength. The head of labor statistics at the Australian Bureau of Statistics, Bjorn Jarvis, noted that the narrowing gap between employment and hours worked growth rates over the past 18 months suggested a less tight labor market.

While the unemployment rate remained near 40-year lows, the unexpected increase signaled potential cooling, attributed to higher interest rates and restrictive monetary conditions. The strong employment figures influenced the Australian dollar's rise but did not eliminate concerns about the overall economic outlook. The Reserve Bank of Australia aimed to cool the labor market to curb inflation, which remained above the 2% annual target.

Consumer sentiment in Australia marginally improved in early December, influenced by the Reserve Bank of Australia's decision to maintain interest rates and provide limited signals on future hikes. However, concerns persisted due to high inflation and increased taxes, making 2023 the second-worst calendar year for sentiment since 1974.

The labor market's strength supported household sentiment, but caution prevailed amid inflationary pressures. The Australian economy, growing slightly below expectations in Q3, faced headwinds from declining exports to China, compensated by elevated government spending to counter a consumer spending decline.

Business confidence in Australia hit its lowest point since the pandemic in November, reflecting softer sales and profits. As the Federal Reserve signaled rate cuts, futures indicated that the RBA might be done tightening, with expectations of over 50 basis points of easing in 2024.

Despite concerns about inflation and interest rates, Australia's economy continued to expand, with data showing increased business activity in December.

The global economic landscape remained uncertain, with the U.S. Federal Reserve contemplating rate cuts in the coming year. However, statements from Fed officials, including Chairman Jerome Powell, indicated a more dovish tone, causing fluctuations in the dollar.

In the upcoming week, investors anticipated the release of the personal consumption expenditures report, the Fed's primary inflation gauge, and other economic indicators such as consumer confidence, jobless claims, durable goods orders, and housing sector reports. Atlanta Fed President Raphael Bostic was scheduled to speak on Tuesday, adding to the factors influencing market dynamics. Consequently, the AUD/USD currency pair is expected to experience low trading activity toward the end of the year, with the possibility of minor fluctuations within a limited range.

Data for Technical Analysis (30 Min) CFD AUD/USD

Resistance : 0.6718, 0.6722, 0.6727

Support : 0.6708, 0.6704, 0.6699

30Min Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 0.6703 - 0.6708 is touched, but the support at 0.6708 cannot be broken, the TP may be set around 0.6721 and the SL around 0.6701, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6718 - 0.6723, TP may be set around 0.6732 and SL around 0.6706, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6718 - 0.6723 is touched, but the resistance at 0.6718 cannot be broken, the TP may be set around 0.6707 and the SL around 0.6725, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6703 - 0.6708, TP may be set around 0.6695 and SL around 0.6720, or up to the risk appetite.       

Pivot Points Dec 18, 2023 03:43AM GMT

Sources: Investing 1, Investing 2