AUD/USD daily forecast: Inflation in Australia could dampen bets on RBA rate hike

“There is nothing in these results that makes us less likely that the RBA may need to raise interest rates further before a concerted easing cycle can begin.”

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, recently commented on the Australian jobs report, saying:

“Unemployment in Australia is now at its highest level since November 2021. Because unemployment is rising due to increasing labour supply, it is not as bad as a rise in unemployment due to job losses. So the RBA is not going to rush into cutting interest rates. But it is still a slowdown in the labour market and we see the first cut in February 2025.”

US economic calendar

Later in Wednesday's meeting, investors should listen to speeches from FOMC members. Voting FOMC members Christopher Waller and Raphael Bostic are scheduled to speak.

Views on the labor market and the Fed's interest rate stance will be crucial, especially after speculation about a 50 basis point rate cut in September cools.

Support for a 50 basis point rate cut could signal a 15 basis point interest rate differential between Australia and the US, potentially pushing the AUD/USD rate above the $0.70 mark.

Expert opinions on the US labor market and the US economy

On Friday, Parker Ross, chief economist at Arch Capital, looked at the US labor market and the Fed's interest rate path, saying:

“The Fed has never started a mid-cycle adjustment, even though the unemployment rate was already up year-on-year… But I hear that too many rate cuts are priced in!”

Ross elaborated on his comments from Friday, saying:

“That's why I emphasized on Friday that the deterioration in the labor market had never been this advanced before the Fed cut interest rates. The Fed has great confidence in its ability to get the economy moving again, even though there is little evidence in the past that it can do so.”

Short-term forecast: bullish

Short-term AUD/USD trends will depend on Australian inflation numbers, US jobless claims (Thursday) and the US personal income and spending report (Fri.).

Weaker-than-expected inflation in Australia could reduce bets on an RBA rate hike. However, a rise in US unemployment, a decline in private spending and weaker US inflation could fuel bets on a 50 basis point Fed rate hike, potentially pushing AUD/USD towards $0.70.

Investors should pay attention to economic data and central bank commentary that influence the price action of AUD/USD. Monitor real-time data, news updates and expert commentary to adjust your trading strategies.

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AUD/USD exchange rate development

Daily chart

AUD/USD traded comfortably above the 50-day and 200-day EMAs, confirming the bullish price trend.

A breakout of the $0.67967 resistance level could give the bulls a run to $0.68500. Moreover, a move back to $0.68500 could signal a move towards the $0.68996 resistance level.

Investors should pay attention to Australian inflation figures and comments from the central bank.

Conversely, a drop below $0.67500 could signal a decline towards the $0.67003 support level. A break below the $0.67003 support level could give the bears a run towards the 50-day EMA and the upper trend line. Buying pressure could increase at the upper trend line. The 50-day EMA coincides with the upper trend line.

With a daily RSI reading of 66.35 for the last 14 periods, the Australian dollar could overcome the resistance level of $0.67967 before entering the overbought zone.