The Australian dollar started the new trading week on a negative note. This time, it was let down by China, which published relatively weak macroeconomic data today.
It's worth noting that last week, the Aussie came under pressure following a disappointing employment report. The total number of employed people in Australia unexpectedly decreased by more than 20,000, contrary to optimistic forecasts (most analysts had predicted a gain of 20,000 jobs). The structure of this component only exacerbated the situation: the full-time employment indicator plummeted to -56,500, while part-time employment increased by 35,000.
This is a negative signal, as full-time positions offer higher wages and better social security compared to temporary jobs. Therefore, the November result in this respect is unambiguously negative, even though the previous month saw the opposite picture: full-time employment exceeded part-time employment (the ratio being +55.3/-13.1 thousand).
The "headline" figure of the report did not disappoint, as the unemployment rate in Australia remained at 4.3% in November, the same as in October, while most analysts had predicted an increase to 4.4%.
The Australian dollar, paired with the greenback, reacted negatively to this release but managed to hold its ground, finishing Friday's trading within the 66 figure (specifically at 0.6654).
And this is concerning, as the US dollar index slightly recovered at the end of last week amid "moderately hawkish" statements from Federal Reserve representatives (Hammack and Goolsbee). They advocated maintaining a wait-and-see stance, citing the unacceptably high inflation rate. In particular, Cleveland Fed President Elizabeth Hammack stated that the US labor market is "gradually" cooling while inflation persists above the target level. In this context, she expressed confidence that the next Fed chair "will prioritize the inflation target." Notably, Hammack will gain voting rights in the Committee in 2026, so her comments supported the greenback. Moreover, other Fed representatives, including Chicago Fed President Austan Goolsbee, echoed hawkish sentiments. He stated that the labor market is "moderately cooling," while inflation risks "raise serious concerns." He criticized the central bank's decision to lower rates at the December meeting, saying his own rate is "below the median forecast for 2026" (reminding that the Fed's updated median forecast in December anticipates just one round of rate cuts in the next year).
These hawkish signals from Goolsbee and Hammack supported the US dollar, allowing sellers of AUD/USD to take the initiative in the pair and reclaim some lost positions. However, as soon as the pair declined to the 0.6630 mark, the downward momentum faded, as traders took profits and did not aim for the 65 figure.
The Aussie's resilience is due to the divergence between the Fed's and the Reserve Bank of Australia's policies. Essentially, most members of the US central bank agree that they will continue to lower interest rates—the issue is only about the pace of monetary easing. In contrast, the RBA signaled the possibility of tightening monetary policy after its December meeting. According to RBA Governor Michele Bullock, there are only two options under discussion—maintaining the status quo or raising interest rates, with no talk of a rate cut. The disappointing labor market report in Australia has increased the chances of a wait-and-see stance, but the key role will be played by fourth-quarter inflation data, which will be released in January. This is the first factor. Secondly, one poor report does not constitute a trend. For instance, in the previous month (i.e., October), employment increased by 40,000, driven by full-time jobs.
In other words, selling the AUD/USD pair appears risky. The current fundamental backdrop does not favor the resumption of an upward trend, but there are no grounds for a sustained (this is the key word) downward movement at the moment.
Weak Chinese data drove today's downside momentum in AUD/USD. Specifically, industrial production in China rose by 4.8% in November, while most analysts had anticipated a larger increase of 5.0%. This indicator has been actively declining for the second consecutive month due to weak domestic demand. Retail sales were also disappointing, rising only 1.3% after a 2.9% increase in October. This indicator also came out in the red zone, as the forecast was set at 3.0%.
The released data put pressure on AUD/USD "in the moment." However, once market participants digest this release, the divergence between Fed and RBA policies will come to the forefront again, especially if key releases later this week (NFP and CPI) do not favor the greenback. Therefore, using the AUD/USD's downward momentum to open long positions makes sense, with an initial target of 0.6650 and a main target of 0.6700 (the upper Bollinger Bands line on the daily chart).
