AUD/USD fails to hold gains after mixed US economic data

The AUD/USD pair climbed to 0.6392 on Thursday, supported by weak US labor market reports and robust Australian employment data. Initial Jobless Claims in the US hit a two-month high of, fueling speculation about further Federal Reserve policy easing next. On the Australian side, employment figures exceeded expectations. Despite these factors, the Aussie failed to hold onto gains that took it as high as 0.6430 during Asian trading hours, retreating to stall below 0.6400.

Fundamental overview

The US Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims for the week ending December 7 surged to 242K, above the forecast of 220K, signaling a weakening labor market. Additionally, the Producer Price Index (PPI) for November showed higher-than-expected inflation on the producer side, with headline PPI increasing by 3% year-over-year (YoY), up from 2.4%, and Core PPI rising to 3.4% YoY, exceeding projections. This mixed economic picture left the US Dollar Index (DXY) at 106.79, up by 15% but unable to gain significant traction.

For next week’s Federal Reserve (Fed) decision, markets seem to be holding onto the weak Jobless Claims and proceed to almost price in a cut  which seems ot be limiting the USD’s ganl.

On the Australian front, November's employment data crushed estimates, adding 35.6K jobs compared to the 25K forecast, and pushing the unemployment rate down to 3.9%, better than the predicted 4.2%. While these figures prompted a reassessment of monetary policy expectations, with market odds for a February rate cut dropping from 70% to 50%, the Reserve Bank of Australia (RBA) maintained a dovish stance, emphasizing its confidence in inflation moving sustainably toward target.

Technical overview

Technically, AUD/USD saw volatile movements, testing highs near 0.6430 before retreating below 0.6400. Resistance remains strong at 0.6430, with intraday trading struggling to sustain momentum above the 0.6400 psychological level. Support is observed around 0.6360, aligning with a recent pivot point. RSI indicators suggest a lack of decisive bullish momentum, while short-term moving averages indicate potential consolidation. A break above 0.6430 could pave the way for further gains, but failure to hold above 0.6400 increases the risk of a pullback toward the lower support range.