The Australian Dollar surges on a blockbuster jobs report as rate hike bets increase

FUNDAMENTAL
OVERVIEW

USD:

The US Dollar recovered a
little yesterday as Trump announced that he reached a “framework” of a
deal for Greenland and that he won’t go ahead with tariffs. Moreover, we got
Fed’s Cook hearing yesterday and the Supreme Court appeared likely to deny
Trump’s request to immediately fire her.

Barring another
geopolitical escalation somewhere, the focus will switch to the US data and the
Fed’s interest rate path for 2026. The data has been improving recently, especially
on the labour market side. If we more of such or even better, that will likely
keep supporting the US Dollar as rate cuts get slowly priced out. Right now, the market is pricing a total of 46 bps of easing by year-end.

AUD:

On the AUD side, we got a
blockbuster Australian
jobs report today with the unemployment rate falling to 4.1% vs 4.4%
expected. This was a big hawkish surprise and the market responded by increasing
the probabilities for a rate hike already at the upcoming meeting to 58%.

As a reminder, the RBA at
the last policy decision sounded more hawkish following a series of
higher-than-expected inflation reports. The central bank also discussed whether
a rate hike might be needed at some point in 2026.

We still have the quarterly
inflation report before the RBA’s meeting which could take the probabilities to
50% if we get soft figures. Conversely, stronger than expected data will seal
the rate hike and could even raise the total tightening expected by year-end,
which is seen at 47 bps at the moment (two rate hikes).

AUDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that AUDUSD extended the rally into new highs following the blockbuster
Australian jobs report. The natural target for the buyers is the top trendline near
the 0.69 handle. If the price gets there, we can expect the sellers to step in
with a defined risk above the trendline to position for a drop back into the
0.6400 handle.

AUDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum on this
timeframe. If we get a pullback, we can expect the buyers to lean on the
trendline with a defined risk below it to position for a rally into new highs.
The sellers, on the other hand, will look for a break lower to pile in for a
drop into the 0.6660 level next.

AUDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, we can
see that the price already reached the upper bound of the average daily range for today. In such instances, we
can generally see some consolidation or a pullback before the next move. Again,
the buyers will have a better risk to reward setup around the trendline, while
the sellers will need a break lower to open the door for new lows.

UPCOMING CATALYSTS

Today we get the latest US Jobless Claims figures, while tomorrow we conclude
the week with the US Flash PMIs.