The Australian dollar has fallen almost 1% after the US nonfarm payrolls and has given up today’s earlier gains. In the North American session, AUD/USD is trading at 0.6644, down 0.40%.

The US dollar has started 2024 on the right foot, recording gains against most of the major currencies in the month of January. The Australian dollar slipped 3.59% against the US dollar in January and on Thursday, the Aussie dollar dropped as low as 0.6508, its lowest level since November 20.

US nonfarm payrolls shocker

The week wrapped up in dramatic fashion, as the US nonfarm payroll report was red-hot, surging to 353,000 in January and blowing past the market estimate of 180,000. The December release was revised upwards to 333,000, up from 216,000. The massive job gain has propelled the US dollar higher against the major currencies, as expectations of a March rate cut have nosedived. In the aftermath of the nonfarm payroll report, the probability of a March cut has dropped to 19%, compared to 38% just a day ago according to the CME FedWatch tool.

Federal Reserve Chair Powell dampened hopes for a March cut at this week’s meeting, when he said that a March cut was not likely, although he was careful not to completely rule out such a scenario. The markets are pinning their hopes on the May meeting, with the likelihood of a quarter-point cut at 62%, according to CME’s FedWatch.

The Reserve Bank of Australia meets on February 6 amid signs that the economy continues to cool down. Inflation eased to 4.1% y/y in the fourth quarter, down from 5.4% in Q3, while retail sales sunk in December with a decline of 2.7% m/m. The RBA is virtually certain to pause next week and is expected to start to trim rates later this year.

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AUD/USD Technical

• AUD/USD is testing support at 0.6544. Next, there is support at 0.6514
• There is resistance at 0.6613 and 0.6652

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