Australian Employment Preview: Upbeat figures may give a temporal boost to the Aussie

Australia will unveil January employment figures on Thursday, alongside February Consumer Inflation Expectations. Market participants anticipate the country has added 30,000 new jobs in the month, after losing 65,100 in December. Breaking down the previous figure, Australia lost roughly 106,600 full-time positions and added around 41,400 part-time ones. Additionally, the Unemployment Rate is foreseen to have ticked higher, from 3.9% to 4%, while the Participation Rate is expected to have advanced to 66.9% from 66.8%.

Meanwhile, Consumer Inflation Expectations, released by the Melbourne Institute, stood at 4.5% in January. The higher the figure, the lesser the odds are for a soon-to-come rate cut from the Reserve Bank of Australia (RBA).

Reserve Bank of Australia gaining confidence

 The RBA met early in February, and policymakers noted inflation continued to moderate at the end of 2023, but added that it remains too high. Regarding employment, the monetary policy meeting statement reads: “Conditions in the labor market continue to ease gradually, although they remain tighter than is consistent with sustained full employment and inflation at target.”

Policymakers are showing modest signs of confidence regarding inflation falling back to target. Last week, Governor Michele Bullock noted that the central bank may not wait for it to reach the 2%-3% band to cut rates if the economy continues to head in the right direction. Bullock added the Board may consider removing the restrictive policy if policymakers believe inflation will continue to recede.

However, market participants are not looking for soon-to-come rate cuts, more likely in 2025. Recent United States (US) data showing heating inflation at the beginning of the year indeed adds to speculative caution.

AUD/USD possible scenarios

AUD buyers may welcome better-than-anticipated figures and push the AUD/USD higher, as recent comments from Governor Bullock may offset concerns of a too-tight labor market. Generally speaking, tight employment conditions increase the upward risks of inflation.

Ahead of the announcement, the AUD/USD pair trades around 0.6480, not far from a fresh 2024 low of 0.6442. The ongoing bounce is more likely related to downward exhaustion after Tuesday’s sell-off rather than to renewed AUD strength.  

From a technical perspective, the 23.6% Fibonacci retracement of the latest daily slump comes at 0.6542, a potential near-term bullish target, should the employment report result upbeat. Such an advance, however, will not invalidate the longer-term bearish stance, as the pair would need to run past the next Fibonacci resistance, the 38.2% retracement at 0.6606.

Disappointing figures could push the AUD/USD pair below the aforementioned yearly low, moreover, if the market sentiment turns sour ahead of the event. The pair may then have room to extend the slump towards the 0.6400 figure, while once below the latter, the next relevant level to watch is 0.6370.