The Australian dollar traded slightly higher on Friday, expecting today’s headline US economic figures near three-month highs.
RBA to slow down rate hikes
All 30 economists surveyed by Reuters predict that the Reserve Bank of Australia will raise interest rates by 25 basis points on December 6 to 3.10%, its third consecutive increase following a series of half-point hikes.
The consensus projection is that the RBA will raise rates by an additional 50 basis points by the end of the second quarter of 2023, bringing the terminal rate to 3.60%.
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Moreover, Philip Lowe, governor of the Reserve Bank of Australia (RBA), stated that the RBA’s choice to downshift reflected monetary policy delays. This cycle is extremely likely to have lengthier policy delays.
“Domestic spending has been resilient to higher interest rates thus far. We are aiming to slow inflation without negatively impacting the economy too much,” he added regarding inflation and a possible recession.
In other news, Chinese stimulus will likely continue in the next year, as said by Chinese Finance Minister Liu Kun
“We will continue with policy stimulus and generally stable yuan. Moreover, we will continue to implement policy packages and strive to realize the goal of creating 11 million new urban jobs.”
Focus on US jobs market
During the US session, the consensus estimate is that job creation (non-farm payrolls) will decrease to 200,000 from 261,000 in the previous month, with the unemployment rate remaining unchanged at 3.7%. Annualized average hourly earnings are projected to increase to 4.6% from 4.5% in the previous month.
As for the probable reaction of AUD/USD to these numbers, negative news could theoretically strengthen expectations of a halt in Fed rate rises, which would be bearish for the dollar and bullish for AUD/USD.
In contrast, an NFP report that is greater than anticipated might boost the dollar, but this is unlikely to be enough to seriously threaten the likelihood of a December Fed flip.
Technically speaking, the AUD/USD pair has jumped above the resistance level of previous highs near 0.6785, and as long as it trades above it, the short-term outlook seems bullish.
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However, there is a bearish divergence between the price and the RSI indicator, suggesting bulls should be cautious as volatility will likely be elevated after the US labor market data.