Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6170.
• Add a stop-loss at 0.6300.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 0.6320 and a take-profit at 0.6400.
• Add a stop-loss at 0.6250.

The AUD/USD price continued dropping as investors focused on the latest Australian jobs data. It dropped to a low of 0.6265, lower than this week’s high of 0.6360. The Australian dollar has slipped by over 13% this year.
 

Australian labor market tightening

The Australian labor market continued tightening as the country continued tightening. The unemployment rate remained at 3.5% in September, which was the lowest level in over 50 years.

This decline happened as the country added another 9,000 jobs in September after it added 33.5k in the previous month. The participation rate remained at 66.7%. This means that Australia has the second-tightest labor market in the developed market after Canada.

However, the biggest challenge is that wage growth has lagged behind inflation. The most recent data showed that wage growth rose by 2.6% in Q2, which was lower than the median estimate of 2.4%. This is one of the top reasons why the Reserve Bank of Australia has developed cold feet on interest rate hikes.

The AUD/USD price also retreated after the Federal Reserve published its Beige Book. The report, which is published eight times per year, said that the outlook of the economy grew more pessimistic amid rising worries about demand. Labor demand declined in some districts while national activity expanded modestly from the previous report.

The Fed has been in an aggressive tightening process in the past few months. It has hiked rates by more than 300 basis points as it tried to contain inflation that has stubbornly remained above 8% in the past seven straight months.

Therefore, a divergence between the Fed and RBA has emerged. While the Fed is expected to keep hiking interest rates, analysts expect the RBA to slow the pace of its increases.
 

AUD/USD forecast

The AUD/USD price remained under pressure after the Australian jobs data. It remains below the 25-day moving average and the middle line of the Bollinger Bands. The pair is also below the important resistance level at 0.6364, which was the lowest point on September 28.

At the same time, the Relative Strength Index (RSI) moved below the neutral point at 50. Therefore, the pair will likely continue falling as sellers target the next key support at 0.6170. The stop-loss of this trade will be at 0.6364.

(Click on image to enlarge)

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