The Australian dollar touched its lowest level since early July, dropping as much as 1.1% to $0.6894 on Thursday, according to reports from Bloomberg. The currency extended its intraday descent through the early European session and weaken further below mid-0.6900s, hitting a one-week low in the last hour. The AUD/USD pair attracted heavy selling following disappointing Australian jobs data, retreating further from levels beyond the 0.7000 psychological mark that was touched the previous day.
The Australian Bureau of Statistics (ABS) reported that the number of employed people declined by 39.3K in September, reversing the previous month's rise of 39.5K and missing estimates of a 20K increase by a big margin. Furthermore, the Unemployment Rate edged higher to 4.7% from 4.6% in August, dampening hopes for another rate hike by the Reserve Bank of Australia (RBA). This disappointing employment data has been a clear drag on the Australian dollar, raising the risk that the RBA has hiked enough and is slowing the economy, according to Tim Baker, head of foreign-exchange research for the Americas at Deutsche Bank.
The artificial-intelligence selloff hasn't helped either as the currency is sensitive to risk appetite, Baker noted to Bloomberg. Stocks have been sliding as a decline in the AI trade gathered speed and pushed investors to seek safety in bonds. Despite the recent decline, the Aussie has been one of the best performers in the Group of 10 against its US counterpart this year, buoyed by the RBA's aggressive rate hiking cycle. However, the current bearish fundamental backdrop backs the case for a further depreciating move for the AUD/USD pair.
Against the backdrop of the previous day's failed attempted to build on momentum beyond the 100-period Exponential Moving Average (EMA), Thursday's breakdown below the rising support line validates the negative outlook. The AUD/USD pair seems vulnerable to retest the structural anchor of the prior uptrend near 0.6905, where buyers could attempt to slow the decline if selling pressure extends. On the topside, initial resistance appears at the former trend-line support turned barrier around 0.6961, ahead of the 100-period EMA at 0.6998, which reinforces the cap on any rebound attempts. Traders now look forward to the release of the US Producer Price Index (PPI) and Fed Chair Kevin Warsh's speech at the IMF and World Bank in Bangkok on Friday for more policy cues.
Hedge funds have been curtailing their bullish views on the Aussie for the past three weeks, while still remaining positive on the currency since December, as reported by Bloomberg. Maximillian Lin, a strategist at Canadian Imperial Bank of Commerce, said the data affirms a November hold for the next RBA policy meeting. However, he noted that a December hike is still possible as jobs data is 'notoriously volatile,' according to Bloomberg reports. The outlook will play a key role in influencing the USD price dynamics, with the aforementioned bearish fundamental backdrop supporting further depreciation for the AUD/USD pair.
