AUD/USD refreshes day high near 0.6650 as upbeat Aussie Employment stems more rates from RBA

AUD/USD has printed a fresh intraday high at 0.6645 in the early European session amid upbeat Australian labor market data and extended correction from the US Dollar Index (DXY). The Aussie asset has stretched its recovery from below the round-level support of 0.6600 as investors are paring positions from the USD Index, backed by fears of the global banking crisis.

The US Dollar Index (DXY) has stretched its correction to near 104.40 as investors are shifting their focus on the uncertainty associated with an upcoming monetary policy from the Federal Reserve (Fed). On Wednesday, investors shifted their funds into the USD index to dodge volatility fueled by Credit Suisse’s fiasco.

S&P500 futures are holding significant gains generated in the Asian session after a sell-off on Wednesday, portraying a minor rebound in investors’ risk appetite. However, the overall market mood is quite risk-off. Fears of global financial instability propelled by the debacle of Credit Suisse have fueled demand for US government bonds. This has led to declining in the 10-year US Treasury yields to 3.48%.

Less-hawkish stance looks likely by Federal Reserve

A few days back, market participants were anticipating bigger rates announcement from the Federal Reserve (Fed) as January’s United States economic data conveyed the inflation outlook is extremely stubborn. However, the release of the downbeat US Retail Sales and lower-than-anticipated Producer Price Index (PPI) figures on Wednesday after softening of the Consumer Price Index (CPI) and the print of a higher Unemployment Rate have conveyed that January’s data was a one-time blip. This has cemented the odds of the continuation of smaller rate hikes. Also, fresh fears of banking sector turmoil have opened doors for a steady monetary policy.

Along with bringing down persistent inflation, restoring of investors’ confidence after the Silicon Valley Bank (SVB) collapse, has become an important Key Responsibility Area (KRA) for Fed chair Jerome Powell.

Upbeat Australian Employment fuels hope of more rates from RBA

The release of the better-than-anticipated Australian Employment data has added to troubles for the Reserve Bank of Australia (RBA), which is devoting significant time to bringing down the elevated inflation. In February, the Australian economy added fresh 64.6K payrolls, significantly higher than the consensus of 48.5K. Investors should note that the Australian economy reported 11.5K lay-offs in January. The Unemployment Rate has been trimmed further to 3.5% from the estimates of 3.6% and the prior release of 3.7%.

This indicates that the labor demand is extremely solid and further requirements of talent will be offset by higher offerings from the firms. Escalating labor cost index is sufficient to fuel inflationary pressures further. RBA Governor Philip Lowe might continue to target more rates as a higher laborforce in action would result in spiking inflationary pressures further.

Earlier, Australian Consumer Inflation Expectations (Mar) data that demonstrate inflation projections for the next 12 months dropped to 5.0% from the consensus of 5.4% and the former release of 5.1%. The impact of lower consumer inflation expectations looks to fade after solid Australian labor market data.

AUD/USD technical outlook

AUD/USD is oscillating in a broader range of 0.6548-0.6718 on a daily scale. The Aussie asset has turned sideways after drifting to near the horizontal support plotted from November 14 low at 0.6585. The 20-period Exponential Moving Average (EMA) at 0.6713 is barricading the Aussie bulls.

Failure by the Relative Strength Index (RSI) (14) in shifting into the 40.00-60.00 range indicates more downside is in pipeline.