Australia's Labor Market Tightens, US Growth Slows

In March, Australia experienced a slight contraction in its labor force, following a substantial increase in the previous month. Despite this, the labor market remained relatively tight, with low unemployment rates and high participation levels. Although the unemployment rate in March rose to 3.8% from 3.7% the month before, it stayed well below the highs observed earlier in 2024.

The Reserve Bank of Australia closely monitors the tightness of the labor market when making decisions regarding interest rates. A robust job market has been a driving force behind inflationary pressures over the preceding years. Consequently, the RBA is likely to maintain higher interest rates for an extended period, considering the strength of the labor force and persistent inflation.

In the United States, the dollar experienced fluctuations on Thursday, following unexpected deceleration in economic growth and an unwelcome acceleration in inflation. The Commerce Department reported that U.S. gross domestic product (GDP) grew at a 1.6% annualized rate in the January-March period, which was slower than the anticipated 2.4% rate.

In March, there was a moderate increase in new orders for crucial U.S.-manufactured capital goods, while data from the previous month was revised downward, suggesting that business spending on equipment likely remained subdued in the first quarter.

Additionally, the core personal consumption expenditures (PCE) price index, a key measure of underlying inflation, rose by 3.7% in the first quarter, surpassing forecasts of a 3.4% increase. These inflationary figures place a heightened focus on the forthcoming release of PCE price index data for March, as inflation continues to exceed the U.S. central bank's 2% target.

Despite signs of economic cooling, evidenced by the slower growth rate, the labor market remains resilient. Weekly jobless claims report a decline in unemployment benefits claims, indicating ongoing tight labor market conditions. Businesses, faced with labor shortages during and after the COVID-19 pandemic, are retaining employees and enjoying increased profitability. Strong consumer spending, supported by low layoffs and elevated wage growth, continues to drive economic activity.

The outlook for U.S. economic growth remains uncertain, with the potential for revisions to GDP components and ongoing assessments of inflationary trends. Investors and analysts are closely monitoring forthcoming data releases, including March inflation figures and the April jobs report, for insights into the trajectory of the economy and potential shifts in monetary policy.

Following the GDP data release, the U.S. rate futures market adjusted its expectations. Traders are now factoring in higher probabilities of rate cuts in November, while expectations for a June cut have diminished. The Fed's next policy meeting is imminent, and the policy rate is anticipated to remain unchanged within the current range. Consequently, the AUD/USD currency pair tends to maintain stability, fluctuating within its current range, with expectations that the AUD's appreciation will be constrained over the long term due to the differing economic returns of the two countries.

Data for Technical Analysis (1H) CFD AUD/USD

Resistance : 0.6532, 0.6534, 0.6537

Support : 0.6526, 0.6524, 0.6521

1H Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 0.6516 - 0.6526 is touched, but the support at 0.6526 cannot be broken, the TP may be set around 0.6534 and the SL around 0.6511, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6532 - 0.6542, TP may be set around 0.6546 and SL around 0.6521, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6532 - 0.6542 is touched, but the resistance at 0.6532 cannot be broken, the TP may be set around 0.6526 and the SL around 0.6547, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6516 - 0.6526, TP may be set around 0.6512 and SL around 0.6537, or up to the risk appetite.       

Pivot Points Apr 26, 2024 02:36AM GMT