Audusd drops slightly amidst mixed economic data and shifting trade balance

AUDUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.07%	-4.5 Pips
Week to-date	2.21%	135.8 Pips
February	1.05%	65.5 Pips

Upcoming key events (London Time)

Fri 01:30 PM USD Nonfarm Payroll Employment

What happened lately

In the United States, recent economic data suggests mixed signals about the labor market’s health and productivity. The U.S. Unit Labor Costs increased significantly to 3% in the Q4 flash estimate from the prior 0.8% in Q3, indicating rising expenses for employers per labor unit. This increase could suggest upward pressure on wages, which may lead to inflationary tendencies. The initial unemployment insurance claims also rose to 219K for the week ending February 1, indicating a slight weakening in the labor market compared to the previous evaluations. Notably, the nonfarm business labor productivity decreased in Q4 to 1.2% from 2.2% in Q3, pointing towards reduced efficiency in labor utilization during this period.

In Australia, business confidence showed a slight recovery, with the National Australia Bank’s Business Confidence index improving to -4 points in Q4 from the previously revised -6 points in Q3. This improvement, although still negative, indicates a modest restoration of optimism among businesses. However, Australia’s international trade in goods presented a less favorable picture. December saw a decline in the trade surplus to 5085M from 7079M in November, affected by a notable increase in imports of goods, which rose by 5.9% from 1.4%, and a decrease in exports, which fell to 1.1% from 4.8% in November. This change suggests Australia’s trade has become less favorable, impacting the economy’s external balance.

The news from these economic data releases has implications for the AUD/USD exchange rate. The increase in U.S. labor costs and the slight rise in unemployment claims provide a mixed outlook for the U.S. economy where inflation concerns might linger, alongside hints of labor market fragility. Meanwhile, Australia’s improving business confidence is overshadowed by unfavorable trade data, which could weaken the Australian dollar’s standing. As a result, with the U.S. economy showing signs of friction and Australia’s trade balance turning detrimental, the AUD/USD seems to be at a pivotal point. A modest drop in the value of the Australian dollar relative to the U.S. dollar might continue, especially if upcoming U.S. indicators, such as the Nonfarm Payroll Employment figures, extend current trends by bolstering the U.S. economic outlook further.

Latest from X (Twitter)

Tweets by Australian Bureau of Statistics

What can we expect from AUDUSD today?

AUDUSD on Thursday dropped -0.07% to 0.62800. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for AUDUSD looks bearish as the pair posted lower in Thursday trading session.

Looking ahead for the day, immediate support level is at S1 0.62605 with break below could see further selling pressure towards S2 at 0.62409. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.62880 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.62547 would indicate selling pressure.

For the week to-date, take note that AUDUSD is bullish as the pair continued to trade higher and is up by 2.21% over the past few days.

Key levels to watch out:

#AUDUSD Trending on Twitter

[custom-twitter-feeds hashtag=”#AUDUSD” num=3 showheader=false]