Australian Dollar hovers above a major level amid fears over escalation of Middle-East conflict

The Australian Dollar (AUD) faces a third consecutive day of losses, likely influenced by a prevailing risk-off sentiment. However, the AUD/USD pair found some uplift from a weakened US Dollar (USD) following comments by Federal Reserve (Fed) Chairman Jerome Powell on Thursday. Powell's indication that the central bank is not planning to raise rates in the short term provides support for the pair.

Australia's employment landscape is undergoing some intriguing developments. In September, Employment Change declined more than expected, introducing an unexpected twist to the equation. On the bright side, the Unemployment Rate took a positive turn by falling more than anticipated, deviating from the expected trend.

The US Dollar Index (DXY) rebounds from the recent losses, and this could be attributed to the higher US Treasury yields, coupled with robust economic data from the United States (US).

United States (US) job data showed the economy remains solid. The weekly Initial Jobless Claims have dropped to their lowest level since January, signaling a solid and resilient job market. On the other hand, existing home sales have fallen to their lowest point since 2010, suggesting challenges in the housing market.

The decline in existing home sales is particularly noteworthy, pointing to the negative impact of higher mortgage costs on housing market confidence.

Daily Digest Market Movers: Australian Dollar extends losses on stronger US employment data

• Australia's Unemployment Rate for September surprised on the positive side, coming in at 3.6%. This outperformed expectations of 3.7% and matched the previous figure of 3.7%.
• Australian Employment Change for the same month was 6.7K, falling short of the consensus forecast of 20K. This is a notable decline from the 64.9K jobs added in August.
• Australia's central bank expresses heightened concern about the inflation impact stemming from supply shocks. Governor of the Reserve Bank of Australia, Michele Bullock stated that if inflation persists above projections, the RBA will take responsive policy measures. There is an observable deceleration in demand, and per capita consumption is on the decline.
• The People´s Bank of China (PBoC) left Loan Prime Rates (LPR) unchanged at 3.45% for the one-year and 4.20% for the five-year. Furthermore, China's Retail Sales (YoY) demonstrated a rise of 5.5%, surpassing both the previous figure of 4.6% and the expected 4.9%.
• The situation in Israel, with preparations for a potential ground invasion of Gaza, is likely adding a layer of uncertainty for traders of the AUD/USD pair.
• Federal Reserve Chair Jerome Powell clarified that additional tightening of monetary policy might be justified if there's substantial evidence of growth surpassing the norm or if the labor market ceases to improve.
• Powell underscored that the primary concern remains inflationary risks. However, the policymaker indicated that the central bank is not planning to raise rates in the short term providing support for the AUD/USD pair.
• US weekly Initial Jobless Claims declined to 198K, falling short of the market expectations of 212K for the week ending October 14, the lowest level since January.
• Existing Home Sales Change fell 2.0% MoM in September and Existing Home Sales improved to 3.96M.
• Building Permits for September came in at 1.475 million, surpassing the expected 1.45 million. On the other hand, Housing Starts rebounded to 1.35 million, just shy of the market consensus of 1.38 million.
• The US Bureau of Economic Analysis (BEA) disclosed that Retail Sales exceeded expectations of 0.3% MoM, which increased to 0.7% in September. While Retail Sales Control Group rose by 0.6% compared to the previous hike of 0.2%.
• This robust performance underscores the resilience of consumers. Subsequently, the Federal Reserve reported that Industrial Production showed improvement by 0.3%, which was expected to remain at 0.0%.
• Market fluctuations persist in the US bond market, as the 10-year Treasury yield stabilizes around 4.99%, marking its highest point since 2007. Meanwhile, the 2-year yield has dipped to 5.16%.
• No major reports are on the horizon in the US. Federal Reserve officials Logan, Mester, and Harker are set to address the public, but their speeches are unlikely to spring any surprises.

Technical Analysis: Australian Dollar hovers above 0.6300 major level after remarks by Fed’s Powell

The Australian Dollar is currently trading lower around 0.6320 on Friday, in alignment with significant support at the 0.6300 level. The immediate support is marked by the monthly low at 0.6285. On the upside, a critical resistance is identified around the 14-day Exponential Moving Average (EMA) at 0.6354, followed by the major level of 0.6400. A breakthrough above this level has the potential to reach around the 23.6% Fibonacci retracement level at 0.6429.

AUD/USD: Daily Chart