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AUD/USD Forecast: Aussie Dollar Eyes Australian Jobs Data, RBA

AUD/USD Forecast: Aussie Dollar Eyes Australian Jobs Data, RBA

2020-02-19 21:55:00
Rich Dvorak, Analyst
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AUD/USD FORECAST: AUSTRALIAN DOLLAR HINGES ON CORONAVIRUS IMPACT & MONTHLY LABOUR FORCE SURVEY

  • AUD/USD remains under pressure as US Dollar strength reverberates across the broader currency market following the novel coronavirus outbreak in Wuhan, China
  • The Aussie is flirting with decade lows after a 5% nosedive in AUD price action since the start of the year and upcoming Australian jobs data has potential to exacerbate recent weakness
  • Australian Dollar outlook could brighten if monthly employment data on tap for release encourages traders to further unwind RBA interest rate cut expectations

AUD/USD price action is down a whopping 350-pips since January 01. Recent downside in spot AUD/USD is owed primarily to the confluence of bearish fundamental developments stemming from a flareup in concerns over a novel coronavirus, or COVID-19, earlier this year.

AUD/USD MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% -1% -2%
Weekly 29% -4% 11%
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The coronavirus outbreak has plagued the vast majority of China and is curbing economic activity across the world’s second biggest economy, which just so happens to be Australia’s largest export market.

At the same time, forex traders have witnessed the US Dollar extend to 3-year highs as demand for safe-haven assets swell alongside expectations for downward revisions to global GDP growth forecasts.

AUSTRALIAN EMPLOYMENT CHANGE – AUSTRALIA LABOUR FORCE SURVEY (3-MONTH AVERAGE)

AUD Price Chart Australian Dollar Forecast Australia Employment Change Monthly Data

Australian Dollar bulls have likely grown desperate for evidence that the ongoing selloff will soon subside as spot AUD/USD fluctuates around its lowest level since the global financial crisis roughly a decade ago.

Perhaps the upcoming release of monthly Australia employment data, due February 20 at 00:30 GMT, could serve as a catalyst that helps AUD/USD stage a rebound attempt. Alternatively, the typically high-impact Australian labour force survey has potential to exacerbate the Aussie’s stretch of weakness.

RBA INTEREST RATE CHANGE EXPECTATIONS – RESERVE BANK OF AUSTRALIA OFFICIAL CASH RATE (FUTURES-IMPLIED)

RBA Interest Rate Cut Probability Reserve Bank of Australia AUDUSD Forecast

While Australian jobs data topped consensus estimates for the preceding two reporting periods, a notable downtrend in full-time job growth hangs over the Reserve Bank of Australia (RBA) and could hamper positive progress made toward reaching full employment.

Additional sluggishness in full-time employment gains – or another uptick in the Australia unemployment rate – has potential to re-accelerate RBA rate cut expectations, which would likely weigh negatively on spot AUD/USD and the broader Aussie in turn.

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On the other hand, an overall solid Australian jobs report might encourage traders to further unwind futures-implied probabilities of more RBA interest rate cuts. According to current overnight swaps pricing, another 25-basis point interest rate cut is expected by the September 2020 RBA meeting.

AUD/USD PRICE CHART: DAILY TIME FRAME (SEPTEMBER 2019 TO FEBRUARY 2020)

AUDUSD Price Chart Australian Dollar Forecast

That said, AUD/USD overnight implied volatility has climbed higher ahead of the generally market moving data release o 8.8% and compares to its 20-day average reading of 7.4%.

Correspondingly, spot AUD/USD price action is estimated to hold a 62-pip trading range between 0.6643-0.6705 with a 68% statistical probability if implied volatility measures are believed to be true.

Keep Reading: Gold Nears 7-Year High on Coronavirus Impact; Stocks to Slide Next?

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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