Australia's employment data is strong, and the expectation of interest rate hikes supports the Australian dollar's rise

Global Market Background: US Dollar Continues to Rise, Waiting for Government Shutdown Resolution

The US Dollar Index (DXY) rose for the second consecutive trading day, currently hovering around 99.60. Optimistic expectations that the US government shutdown could be resolved within this week have boosted the dollar. The House of Representatives passed a funding bill on Wednesday with a vote of 222 to 209, which is expected to be signed by President Trump. President Trump even stated that inflation will “soon” fall to 1.5%, a level not seen since February 2021.

Meanwhile, weak US employment data are also sending signals. The Automatic Data Processing (ADP) report on Tuesday showed that, over the four weeks ending October 25, the average weekly unemployment claims were only 11,250, below market expectations, increasing the likelihood of the Federal Reserve further easing policy.

Australia Employment Report Surpasses Expectations, Boosting Rate Hike Expectations

Australia’s employment data released on Thursday provided strong support for the Australian dollar. Data from the Australian Bureau of Statistics (ABS) showed that the unemployment rate in October fell from 4.5% in September to 4.3%, beating market expectations of 4.4%. This improvement signals that the labor market remains tight.

Employment growth also performed impressively. The change in employment for October was 42.2K, far exceeding the expected 20K, and significantly better than the previous data of 12.8K (revised from 14.9K). Full-time employment increased by 55.3K, compared to only 6.5K in the previous month (revised from 8.7K); part-time employment decreased by 13.1K. The labor force participation rate remained stable at 67%.

RBA Deputy Governor Andrew Housser stated on Wednesday, “Our best estimate is that monetary policy remains restrictive.” This suggests that although market expectations for an Australian dollar rate hike in the short term are limited, the RBA remains cautious in policy assessment, and strong employment data lay the foundation for future policy adjustments. As a result, the AUD has gained support.

China Data Unremarkable, Indirect Impact on AUD

As Australia’s largest trading partner, China’s economic data are also worth noting. The National Bureau of Statistics of China reported on Sunday that the Consumer Price Index (CPI) in October rose by 0.2% year-on-year, rebounding from a 0.3% decline in September, surpassing market expectations of 0%. On a month-on-month basis, October’s CPI increased by 0.2%, faster than the 0.1% in the previous month.

Regarding the Producer Price Index (PPI), October saw a year-on-year decline of 2.1%, an improvement from September’s decline of 2.3%, also better than the consensus of -2.2%. The Chinese Ministry of Commerce announced on Monday the temporary removal of export controls on “dual-use items” such as gallium, germanium, antimony, and superhard materials. This adjustment took effect on Sunday and will last until November 27, 2026, indicating some room for fine-tuning China’s economic policies.

Notably, Australian Western Pacific consumer confidence jumped 12.8% to 103.8 in November, reaching a new high since February 2022 and the strongest reading in seven years outside of pandemic periods. This reflects the positive impact of improved economic conditions on consumption.

Technical Outlook: AUD/USD Consolidates in a Rectangular Range

AUD/USD traded around 0.6560 on Thursday. On the daily chart, the pair is in a rectangular consolidation zone, showing clear sideways movement, but remains well above the 9-day exponential moving average (EMA), indicating that short-term bullish momentum remains sufficient.

On the upside, the pair may advance toward the upper boundary of the rectangle, with a target around 0.6630. A successful breakout of this zone would form a bullish breakout, supporting the Australian dollar to test the 13-month high of 0.6707, set on September 17.

On the downside, support levels are at the 50-day EMA at 0.6537, followed by the 9-day EMA at 0.6531. Breaking below these key levels would weaken the medium- to short-term momentum, causing AUD/USD to retreat toward the lower boundary of the rectangle near 0.6470, and potentially further down to the five-month low of 0.6414, formed on August 21.

With the interplay of rate hike expectations and global liquidity changes, the future direction of AUD/USD warrants close attention.