AUD/USD Forecast: Employment Data Boosts Greenback

• There was a bigger-than-expected increase in US employment cost growth.

• Markets have scaled back Fed rate cut expectations to only one cut in 2024.

• The policy outlooks of the Fed and the RBA are pretty similar.

The AUD/USD forecast is leaning bearish as the US dollar strengthens following encouraging employment figures. Additionally, investor sentiment is tilting towards a hawkish stance from the FOMC, further bolstering the greenback and putting pressure on the Australian dollar.

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The US Labor Department reported a bigger-than-expected increase in employment cost growth. This report was another pointer to high inflation in the country. Consequently, there was a decline in Fed rate cut expectations. As investors await more employment figures from the US, there is a chance that they will continue beating forecasts. This, in turn, will keep the Fed hesitant to start cutting interest rates.

Currently, markets have scaled back rate cut expectations to only one cut in 2024. However, after the FOMC meeting, this might change. If Powell is hawkish and highlights the still-high inflation, the dollar might make new highs, further weighing on the Aussie. 

However, the policy outlooks of the Fed and the RBA are pretty similar. Last week, inflation data from Australia beat estimates and led to an erosion of rate cut expectations. As a result, investors do not expect any cuts from the Reserve Bank of Australia this year. Additionally, some are pricing in a slight chance that the central bank will hike interest rates. This similarity in policy outlooks will keep a floor on any declines in the AUD/USD pair. 

AUD/USD key events today

• US ADP employment change
• US ISM manufacturing PMI
• US job vacancies
• FOMC policy meeting
• Bank of Canada governor Macklem speaks

AUD/USD technical forecast: Bears trigger a sentiment shift and eye the 0.6400 support

On the charts, the AUD/USD price has broken below the 30-SMA and the 0.6500 critical level to signal a bearish sentiment shift. This marks the end of the previous bullish trend, which paused at the 0.6575 critical level. When it stopped at this level, the RSI made a bearish divergence with the price, showing bullish momentum was fading. 

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Soon afterwards, bearish momentum surged, reversing the trend. After breaking below 0.6500, the price might retest this level as resistance before targeting the 0.6400 support level.

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• Source: https://www.forexcrunch.com/blog/2024/05/01/aud-usd-forecast-employment-data-boosts-greenback/