By Areena FxThe Australian Dollar slipped to 0.6392 but failed to sustain its gains, pressured by a stronger US Dollar (USD). Market expectations are rising that the Federal Reserve (Fed) may adopt a more hawkish stance following Wednesday’s interest rate cut. Although strong Australian employment data briefly boosted the Aussie, it struggled to maintain upward momentum.
Market Movers: Aussie Gains Eroded by Mixed US Data and Fed Policy Shift
On Thursday, the US Bureau of Labor Statistics reported Initial Jobless Claims at 242K, higher than the expected 220K, signaling a potential softening in the labor market. November’s Producer Price Index (PPI) showed a 3% YoY increase, with core PPI rising by 3.4%, both surpassing expectations and pointing to persistent inflation.
Despite mixed US data that initially fueled speculation of further Fed easing, the US Dollar Index remained near 106.79. Meanwhile, Australian employment data exceeded expectations, with 35.6K jobs added and the unemployment rate dropping to 3.9%. This prompted traders to reconsider their outlook on the Reserve Bank of Australia (RBA) policy, with the probability of a February rate cut dropping from 70% to 50%. However, the RBA still maintains a dovish stance, confident that inflation is trending towards its target.
Fed Chair Jerome Powell’s comments on the resilience of the US economy dampened hopes for a “Goldilocks” scenario heading into the year-end. Combined with the sticky PPI data, markets now expect the Fed to adopt a more hawkish tone in next week’s meeting.
AUD/USD Technical Outlook: Nearing Oversold Conditions Amid Continued Downward Pressure
The Relative Strength Index (RSI) sits at 34, signaling near oversold conditions and modest downward momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram shows decreasing green bars, reinforcing the bearish outlook. If these oversold signals deepen, a corrective upward move could materialize.