The Reserve Bank of Australia (RBA) may cut interest rates for the first time in February.

The Australian dollar is likely to strengthen again, mainly supported by the depreciation of the US dollar. This is due to a slowdown in US inflation, prompting investors to anticipate further rate cuts by the US Federal Reserve this year. Moreover, stronger-than-expected economic growth in China during Q4 has improved trade prospects for Australia’s major trading partners. However, investors need to monitor the RBA's monetary policy closely, particularly after the release of strong employment figures and ahead of the announcement of the latest inflation data.

Australia's unemployment rate slightly increased to 4.0% in December from November’s eight-month low of 3.9%. The number of unemployed rose by 10,300 to 604,100, driven by full-time employment gains, while part-time employment fell by 45,000 to 192,100. Nevertheless, total employment increased by 56,300, hitting a new record high of 14.58 million, reflecting a continuously rising demand for labor domestically. This could lead to increased wage competition, potentially impacting inflation rates.

The consumer confidence index dropped by 0.7% to 92.1 in January, marking the second consecutive monthly decline. Consumer sentiment remains pessimistic, largely influenced by the Australian dollar's depreciation against the US dollar, along with persistent inflation and stable employment levels. These factors have resulted in negative outlooks for interest rates and the overall economy. However, consumer confidence is less negative compared to last year, and many components show signs of potential improvement in the future.

Australia’s job postings increased by 0.3% month-on-month in December, recovering from a 1.8% decline in the previous month but still down 12.5% year-on-year. The latest data continues to reflect the labor market's resilience despite higher interest rates throughout the year. However, certain industries, such as construction and some health-related sectors, have seen hiring slowdowns. In contrast, other sectors like retail and food services added jobs to prepare for the Christmas season. ANZ economist Madeline Dunk stated, “While job postings are unlikely to decline rapidly in 2025, they are expected to gradually slow, which could push the unemployment rate slightly higher to 4.3%.”

The yield on Australia’s 10-year government bonds fell slightly to 4.54%, aligning with a decline in US Treasury yields. This came after US economic data indicated that the Federal Reserve might maintain a more accommodative monetary policy. Meanwhile, domestic investors estimate a 70% chance that the RBA will lower interest rates in its February meeting, despite recent robust employment data, which includes increases in December job figures and new job postings. However, investors await the upcoming quarterly inflation report and retail sales data to anticipate the RBA's future policy directions.

Techical analysis data (5H)

Resistance: 1.616, 1.619, 1.6239

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 1.6032 - 1.6082 but cannot break the support at 1.6082, you may set a TP at approximately 1.619 and SL at around 1.6003 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 1.616 - 1.619, you may set a TP at approximately 1.6239 and SL at around 1.6032 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 1.616 - 1.619 but cannot break the resistance at 1.616, you may set a TP at approximately 1.6032 and SL at around 1.6239 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 1.6032 - 1.6082, you may set a TP at approximately 1.6003 and SL at around 1.619 or according to your acceptable risk.

Pivot point January 18, 2025 09:07 AM. GMT+7