Australian Dollar hovers below a psychological level after mixed Aussie data

• Australian Dollar weakened as the US Dollar surged on solid Nonfarm Payrolls.
• Australia's Trade Balance reduced to 10,959M in January from 11,764M prior.
• Chinese Services PMI reduced to 52.7 in January from the previous reading of 52.9.
• RBA is expected to keep the cash rate steady at 4.35% on Tuesday’s meeting.
• US NFP added 353K jobs in January against the market consensus of 180K.

The Australian Dollar (AUD) faces selling pressure on Monday due to the blockbuster job data from the United States (US), which has resulted in a sharp rise in the US Dollar (USD), weighing on the AUD/USD pair. Additionally, the benchmark S&P/ASX 200 Index retreats from last week's record high, with miners and energy sectors taking the brunt, putting additional pressure on the AUD.

Australian Bureau of Statistics released the Trade Balance for January on Monday. The monthly report showed a reduction, with the figure at 10,959M compared to the revised figure of 11,764M in December. Additionally, the Judo Bank Composite Purchasing Managers Index (PMI) improved to 49 in January from 48.1 prior. The Services PMI saw an improvement, rising to 49.1 from the previous figure of 47.9.

Meanwhile, TD Securities Inflation (YoY) grew by 4.6%, against the previous growth of 5.2%. Furthermore, Chinese Caixin Services PMI reduced to 52.7 in January from the previous reading of 52.9.

The Reserve Bank of Australia (RBA) is set to announce its interest rate decision on Tuesday. In a Reuters Poll, analysts unanimously expect the RBA to keep the cash rate steady at 4.35%. Investors will closely observe RBA Governor Michele Bullock's speech on the monetary policy outlook for further insights into the central bank's stance.

The US Dollar Index (DXY) reaches an eight-week high, fueled by positive market sentiment as a March rate cut appears unlikely. This sentiment is based on a promising labor market report, where data from the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls added 353,000 jobs in January, surpassing the previous reading of 333,000 and exceeding the market consensus of 180,000. Additionally, Average Hourly Earnings (YoY) rose by 4.5%, surpassing the expected 4.1% and the previous 4.4% rise. Traders will further observe the ISM Services Employment Index, which is due to be released on Monday.

US Federal Reserve Chair Jerome Powell reiterated the expectation that the March meeting is likely too soon to have confidence in starting rate cuts. With the economy strong, the Fed intends to approach the timing of rate cuts carefully. Powell expressed that confidence is rising, but the central bank wants more assurance before taking the "crucial step" of initiating rate cuts.

Fed Chair Powell mentioned that they are making good progress on inflation and could potentially move sooner if they observed weakness in the labor market or if inflation were to convincingly decrease. He noted that more persistent inflation could lead to a later move.

Daily Digest Market Movers: Australian Dollar weakens after solid US labor data

• Australian TD Securities Inflation (MoM) grew by 0.3% in January, lower than the December’s rise of 1.0%.
• Australia’s ANZ Job Advertisements rose by 1.7% in January, exceeding the previous growth rate of 0.6%.
• Australian Bureau of Statistics showed a growth in monthly Imports in January rising at 4.8% against the previous reading of -8.4%. While Exports grew by 1.8% against the 0.6% prior.
• US Average Hourly Earnings (MoM) came in at 0.6% for January, exceeding the expected 0.3% and 0.4% reading from December.
• The US Unemployment Rate is unchanged at 3.7% in January against the market consensus of 3.8%.
• US Bureau of Labor Statistics showed that January’s Labor Force Participation Rate remained stable at 62.5%.
• Michigan Consumer Sentiment Index improved to the figure of 79 in January against the anticipated 78.9 and December’s figure of 78.8.

Technical Analysis: Australian Dollar tests the psychological barrier at 0.6500

The Australian Dollar trades around 0.6490 on Monday, situated below the immediate psychological barrier level of 0.6500, following the major level at 0.6550. A break above this level could potentially support the AUD/USD pair to test the resistance zone around the 23.6% Fibonacci retracement at 0.6573, before reaching the 21-day Exponential Moving Average (EMA) at 0.6598. The latter is aligned with the psychological level at 0.6600. On the downside, the 0.6450 level is a key support, following the psychological support at 0.6400.

AUD/USD: Daily Chart