The Australian dollar has started the week with slight gains. Currently, the pair is trading at 0.7626, up 0.25% on the day.
US Nonfarm Payrolls easily outperforms
Friday’s Nonfarm payrolls was expected to be strong, and NFP delivered big, with a read of 916 thousand, up from 379 thousand a month earlier. This figure easily beat the forecast of 652 thousand. With the US recovery gaining traction and the Biden administration pouring trillions of dollars into the economy, we can expect upcoming NFP prints to be above the one million level. That is, if the vaccination rollout continues as planned. The US dollar didn’t show much reaction to the blowout release, and AUD/USD was muted on Friday.
Overshadowed by the sparkling NFP report was a drop in the unemployment rate, which dropped from 6.2% to 6.0%, matching the forecast. Unemployment continues to fall and this was the lowest level since April 2020, prior the huge jump in unemployment due to the Covid pandemic.
RBA expected to remain dovish
The RBA holds its monthly policy meeting on Tuesday (4:30 GMT). The meeting is expected to be uneventful, with the central bank widely expected to maintain interest rate and interest rate and yield curve targets at 0.1%. The bank’s QE programme of A$100 billion is set to expire but will be immediately renewed for a six-month period.
The RBA has been in dovish mode, stating that it expects to maintain its current stance until 2024, when inflation is projected to reach the bank’s target of 2-3%. However, Australia’s economy has been recovering rapidly and it’s entirely possible that inflation could reach this target well before 2024, in which case we could see rate hikes ahead of the RBA’s schedule.
AUD/USD Technical
- AUD/USD faces resistance at 0.7675. Above, there is resistance at 0.7735
- 0.7543 is the first line of support. It is followed by support at 0.7471
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