Yesterday, the AUD/USD pair tested the 78th figure, but it was forced to leave due to the pressure of the US dollar. In the afternoon, the US dollar index soared higher, reflecting increased demand from traders. As a result, the dollar pairs yielded to the USD. However, the gains of the dollar bulls varied in each case: if the US dollar in the USD/JPY pair won more than 100 points, then in the case of the AUD/USD pair, it was content with several tens of points. The Australian dollar, in turn, maintains its position at the center of the 77th figure. To simply put it, we can assume that the buyers of the AUD/USD pair will approach the 78th mark again given the continued vulnerability of the US currency and the strength of the Australian one. Most likely, this will happen tomorrow if Australia's Nonfarm data is released in the positive area.
But first, let's deal with the US dollar, which went into correction yesterday, without any clear and specific reason. There are two possible main reasons for such behavior: First, it is related to investors' concern about the fate of the additional stimulus package for the US economy and the negative consequences of the unusual severe cold weather in the Midwest and the Southern part of the United States. Second, it should be recalled that the American trading floors opened yesterday after a long weekend due to Presidents' Day on Monday. Therefore, traders are using the accumulated fundamental factors. The surge in anti-risk sentiment allowed the dollar bulls to show character, although their position seems to be still weak.
In terms of the fate of the "American Rescue Plan", investors are more concerned about the lack of information around this bill after going through a rough discussion of many weeks. On Tuesday, US President Joe Biden called on Congress to accept the aid package the way it was proposed by the White House. He hopes that there will be a decision within the next few weeks. Earlier, House of Representatives Speaker, Nancy Pelosi, said that the bill would be put to a vote at the end of the month. However, the cost of the bill is still being discussed – Several American media outlets reported that the final aid package will be reduced from $ 1.9 trillion to $ 1.5-1.6 trillion. It is noteworthy that Democrats successfully passed a budget resolution in both houses of Congress that allows them to approve the aid package with a simple majority (which they have in both the House of Representatives and the Senate). Therefore, once congressional Democrats find a common denominator regarding the cost of the bill, the further process will become technical. In other words, this fundamental factor also cannot be considered reliable in the context of the growth of a safe dollar.
On another note, the Australian dollar is still not aware of its full potential. The 78th mark still looms on the range, and it will only be reached depending on what area (green or red) tomorrow's release comes out. As soon as the dollar bulls ease control, the key macroeconomic releases will come to the fore for AUD/USD traders, especially given the RBA's prior rhetoric.
It can be recalled that Australia's latest labor market data came out in the "green" zone, despite experts' negative forecasts. The unemployment rate declined to 6.8%, against the forecast of 7%. At the same time, the growth rate of the number of employed surged by 90 thousand, instead of the forecasted 40 thousand. Most importantly, the indicator primarily rose due to the growth in full employment. Therefore, the full-time component increased by 84 thousand, and the part-time component, by 6 thousand respectively. At the same time, the share of the economically active population increased to 66.1% – this is the best result since August 2019.
Most experts believe that tomorrow's Australian labor market will be positive again. Here, the unemployment rate is expected to decline to 6.5%, while the growth rate of the number of employed should increase again by 30 thousand. Based on their forecasts, the indicators of full employment will increase primarily, while part-time employment will show a weaker result.
On the one hand, high expectations are always risky. If the data fail to reach the forecasted values (or the part-time job exceeds the full one), the Australian dollar will be pushed at the base of the 0.77 level or even to the support level of 0.7680. On the other hand, the pace of recovery in the Australian economy is ahead of earlier forecasts – this fact is recognized by many experts and RBA members, who previously noted that the main indicators are stable. Therefore, if tomorrow's release confirms these claims, the Australian dollar will not only test the resistance level of 0.7800, but will also try to consolidate in that area. In such a case, stop loss can be placed at 0.7680, where Tenkan-sen Kijun-sen lines coincide with the middle line of the Bollinger Bands indicator on the daily chart.
