AUD/USD. Aussie on the Rise: What Do the "Australian Non-Farms" Indicate?

[Ben Graham]

The AUD/USD pair has been rising actively for the fourth consecutive day, hitting a 15-month price high on Thursday. For the first time since the fall of 2024, the Australian dollar tested the 68-figure, marking 0.6840.

The upward momentum of the pair is driven not only by the weakening of the American currency but also by the strengthening of the Australian dollar. In particular, Thursday's support for the Aussie came from the Australian labor market data, which mostly came in the "green zone."

Thus, the unemployment rate on the Green Continent dropped to 4.1%. This is the lowest value since May of last year. In September, unemployment reached 4.5%, then stayed at 4.3% for two months, before decreasing to 4.1% in December (while most analysts were confident that the figure would remain at the November level).

The total number of employed people in December increased by 65,000 (the highest figure since April of last year). This employment growth was more than double the forecast level (28,000).

There is also another very important point. The confident growth in the overall employment figure was driven by an increase in full-time employment, while the part-time employment component showed weak dynamics (a ratio of 54.8/10.4 thousand). This is perhaps the report's key signal. It indicates that businesses are primarily hiring people for the long term, rather than just filling short-term needs. This fact directly enhances wage pressure and domestic inflation. Unlike the growth in part-time employment, this balance (or rather, positive imbalance) reflects a real tightening of the labor market, increasing the importance of December data for the Reserve Bank.

The only component of the report that fell into the red zone is the Participation Rate. However, there are no reasons for concern here: the share of the economically active population was 66.7% in December (the same as in November), while analysts had forecast a slight increase to 66.7%. At the same time, the total number of hours worked across all forms of employment reached record levels, rising by 8 million hours in December to 2,001 million.

What does this report indicate? First of all, it should be noted that a strong labor market has compensated for a decrease in inflation in Australia. I would like to remind you that in November, the overall consumer price index in month-on-month terms remained at zero (as it did in October), while most analysts had predicted a minimal increase of 0.1%. Year-on-year, the overall CPI came in at 3.4%, against a forecast of 3.8%. The indicator had been consistently accelerating for four months, but slowed in November, more than expected.

Yet, despite the "red tint" of the inflation report, the AUD/USD pair renewed its 15-month price high, testing the 68-figure. This was not only due to the greenback's overall weakness but also to the strengthening of the Australian dollar.

The fact is that, despite the November CPI slowdown, inflation in Australia remains above the Reserve Bank's target range (2-3%). Following the last RBA meeting, the central bank stated that it is ready to implement tightening measures if inflation exceeds the central bank's target level "on a sustained basis." Additionally, CPI has been above the three percent level since August of last year.

Secondly, quarterly CPI growth data will play a decisive role for the RBA. The corresponding report (for the fourth quarter of 2025) will be published next week (January 28). Judging by the dynamics of monthly inflation, this release is expected to support the Aussie.

Thirdly, the labor market report published on Thursday allows the central bank not only to maintain a wait-and-see position but also to articulate a "hawkish" rhetoric. Thus, the members of the RBA still have two options on the table: maintaining the status quo or raising the rate.

Therefore, the upward trend in AUD/USD is logical and fundamentally justified. The existing fundamental background contributes to further price growth, not only due to the weakening of the greenback but also because of the strengthening of the Australian currency.

The same is indicated by the "technical" analysis. On all higher timeframes (H4, D1, W1, MN), the AUD/USD pair is either at the upper level or between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator (except MN), which on the four-hour and daily charts formed a bullish "Parade of Lines" signal. The first, and so far the only target for the upward movement, is the 0.6900 mark, corresponding to the upper line of the Bollinger Bands indicator on the MN timeframe.

The material has been provided by InstaForex Company - www.instaforex.com