Australian Employment Preview: Positive data could add fuel to the AUD/USD rally

The Australian labor market continues to exhibit signs that it may have peaked. The Unemployment Rate is expected to have risen slightly in October, remaining close to record lows. Last week, the Reserve Bank of Australia (RBA) increased its key interest rate by 25 basis points following four consecutive pauses. The decision was made in order to have greater confidence that inflation would return to the target range within a reasonable timeframe. The RBA acknowledged that while conditions in the labor market have softened, they still remain tight.

Australia Jobs Data: Less important than inflation, but could be a game changer

The Australian Bureau of Statistics will release employment data on Thursday, November 16, at 00:30 GMT. Following the addition of 6,700 jobs in September, below the 20,000 expected, the country is expected to have added 18,000 new jobs in October.  The Unemployment Rate is forecasted to increase slightly from 3.6% to 3.7%. Although this would match the highest level since May 2022, it would remain near the record low of 3.4% in July 2022. The Participation Rate is expected to remain steady at 66.7%.

A rebound in inflation has prompted the RBA to raise interest rates again, a decision that was possible due to a strong job market. For the RBA to consider another rate hike, the economy needs to remain on track, and the labor market should stay at least balanced, if not necessarily tight.

After the last RBA meeting, the Australian Dollar weakened as the central bank left the door open for another rate hike but raised the bar significantly. The statement was seen as dovish. 

Data released on Wednesday showed that the Wage Price Index rose by 1.3% during the third quarter and 4.0% from a year ago. The numbers were slightly higher than expected, primarily due to an upward revision of previous quarter’s figures.

If the jobs report indicates a significant negative change in employment, it could solidify market expectations that the RBA won't be raising interest rates in the upcoming meetings and might even open up the possibility of a debate about potential rate cuts. However, only a significant surprise in the data would be a game changer. The key figures remain inflation numbers, with the next monthly CPI release scheduled for November 29. 

The last time employment numbers surprised significantly to the upside, the Australian Dollar reacted cautiously. However, the dynamics could be different on Thursday, considering that market sentiment has turned somewhat positive and the US Dollar is weakening against its major counterparts. The US dollar has been declining to levels not seen in months, and positive data could fuel the ongoing rally of the AUD/USD more sustainably. 

AUD/USD Technical Outlook

The AUD/USD rose sharply on Tuesday following the release of the US Consumer Price Index (CPI) report. The rally propelled the pair to break above the 0.6450 resistance level and reach levels above 0.6500. While hovering near these levels, the pair may test the crucial 0.6520 resistance area. A daily close above that level would indicate potential for further gains, suggesting a more sustainable recovery.

However, if the pair fails to break above 0.6520 in the upcoming session, it could lose momentum, triggering a correction initially towards 0.6440 and then 0.6390, around the 20-day and 55-day Simple Moving Averages (SMA). A break below that area would expose the 0.6300 support level.