- Australia’s economy expanded by 0.3% in the third quarter.
- Market participants increased the likelihood of an RBA rate cut in April from 73% to 96%.
- Job vacancies in the US increased to 7.74 million.
The AUD/USD price analysis shows a quickly collapsing Aussie as markets price in a higher likelihood of a Reserve Bank of Australia rate cut in April. Meanwhile, the dollar remained strong after upbeat employment figures in the previous session.
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Data on Wednesday revealed that Australia’s economy expanded by 0.3% in the third quarter, well below estimates for a 0.5% expansion. The weak economic data raised fears of a rapid economic slowdown. As a result, market participants increased the likelihood of an RBA rate cut in April from 73% to 96%.
The RBA has remained cautious while other major central banks lower borrowing costs. Policymakers have noted that interest rates in Australia are not as high as those in other major economies. However, signs of weaker economic performance indicate demand is dropping due to high borrowing costs.
Therefore, it will pressure the central bank to cut interest rates. On the other hand, the greenback strengthened on Tuesday after data revealed that job vacancies in the US increased to 7.74 million, above forecasts of 7.51 million.
Higher-than-expected job openings are a sign that demand for labor is high. Therefore, the labor sector remains robust. However, market participants await the more crucial nonfarm payroll report, which is due on Friday.
This will give a clearer picture of the labor sector and shape the outlook for Fed rate cuts. Now, traders are pricing a 75% chance of a rate cut in December. A downbeat employment report will increase this likelihood and weigh on the dollar. On the other hand, robust numbers will do the opposite.
AUD/USD key events today
- US unemployment claims
AUD/USD technical price analysis: Bears break below range support
On the technical side, the AUD/USD price has broken out of consolidation, with bears aiming for the 0.6400 support level. Before this move, the price was caught in a range between the 0.6450 support and the 0.6550 resistance level.
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However, bears gained enough strength to breach the range support, likely starting a new bearish trend. The price now sits well below the SMA, with the RSI nearing the oversold region. A series of lower highs and lows will confirm a new downtrend.
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Saqib Iqbal
