• AUD/USD falls after solid US non-farm payrolls data, reducing the likelihood of aggressive Fed rate cuts.
• Fed Chairman Powell is signaling a slower pace of monetary easing, with markets now pricing in a 25 basis point rate cut in November.
• Data from Australia shows mixed results, with mighty retail sales and a trade surplus, but a sustained decline in output and a slowdown in business activity.

The Australian dollar fell during the North American session after the United States (US) September jobs report suggested that the Federal Reserve (Fed) would not cut interest rates by 50 basis points (bps) at its November meeting. The AUD/USD rate is 0.6796, down over 0.60%.

AUD/USD deepened its losses after September’s massive U.S. nonfarm payrolls report lowered the unemployment rate. Average hourly earnings were mixed, although overall the data freed the Fed from aggressively cutting interest rates.

In September, the Fed cut interest rates by 50 basis points. Swaps markets showed that investors were already looking for another instrument of the same size at the November or December meeting. But on Monday, Fed Chair Jerome Powell pushed back against that stance, saying officials had projected a total of 50 basis points of interest rate easing by the end of 2024 and that the U.S. central bank was in no rush to cut interest rates.

According to CME FedWatch Tool data, at the November meeting, markets were pricing in a 25 basis point cut in Fed interest rates.

In addition, Australian data showed a solid retail sales report and the August trade balance showed a surplus. While these conditions could prevent the Reserve Bank of Australia (RBA) from cutting interest rates, business activity in the manufacturing sector, as measured by the Judo Bank Manufacturing PMI, has contracted for eight months in a row.

On the other hand, Judo’s Banking Services PMI fell sharply and building permits fell sharply, indicating an ongoing economic slowdown.

Next week’s Australian Economic Report will include business and consumer confidence data, RBA speakers and minutes from recent RBA meetings. As for the US, the schedule will include the release of data on inflation, jobless claims and consumer sentiment from the University of Michigan.

Daily Market Change Summary: Australian Dollar Loses on US Data and Geopolitical Risks

• The Australian dollar is likely to remain under pressure due to several factors. Geopolitical risks such as weekend developments in the Middle East could hurt risk appetite for the AUD.
• The Australian’s economic document will include the NAB Business Confidence and Westpac Consumer Confidence indicators for September and October, respectively. Investors then look at the RBA speeches by Hauser, Kent and Hunter.
• U.S. nonfarm payrolls rose by 254,000 in September, well above the estimate of 140,000. and an upwardly revised number of 159 thousand. from August. The unemployment rate dropped from 4.2% to 4.1%, lower than expected.
• Average hourly earnings in September increased by 0.4% m/m, compared to 0.5% in the previous month, but exceeded forecasts of 0.3%.
• Year-over-year, hourly earnings rose 4% in the 12 months to September, beating estimates and bettering August’s figures of 3.8% and 3.9%.
• Market participants ruled out the Fed cutting interest rates by 50 basis points. According to CME FedWatch Tool data, the probability of a 25 basis point cut is 95%, and the risk of keeping rates unchanged is only 5%.

Technical analysis: Australian dollar continues its losses below 0.6800

Despite a pullback below the 0.6800 level, AUD/USD remains bullish. Momentum is mixed with the Relative Strength Index (RSI) remaining bullish but pointing to a decline in bearish territory.

AUD/USD could accelerate its losses if it breaks through the September 6 high at 0.6767. Once this subsides, the next area of ​​demand will be the 50-day plain moving average (SMA) at 0.6712.

On the other hand, if buyers push AUD/USD above 0.6800, the first supply zone will be the October 1, 2024 low at 0.6856. A breach of the latter will expose the 0.6900 level before retesting the year-to-date high of 0.6934.