The Australian Dollar (AUD) experienced notable declines against both the New Zealand Dollar (NZD) and the US Dollar (USD) ahead of the release of Australia's employment report. On Tuesday, the AUD/NZD cross peaked just under 1.2500, its highest level since early 2013, before retreating to trade just above 1.2400 and heading for a second consecutive day of losses [1]. The recent climb in AUD/NZD was attributed to the widening interest rate gap between the Reserve Bank of Australia (RBA), which holds its cash rate at 4.35% and is widely expected to raise it to 4.60% on September 29, and the Reserve Bank of New Zealand (RBNZ), which stands at 2.75% with no further changes forecast for October 28 [1].
Meanwhile, the AUD/USD pair tumbled over 1% on Wednesday, trading at 0.7039 after peaking at 0.7118, as US Treasury yields surged, with the 5- and 10-year T-note yields surpassing the 5% threshold. This move was driven by investor confidence in further Federal Reserve tightening, with the US Dollar Index (DXY) gaining 0.57% to 101.25 [2]. US economic data showed resilience, with the S&P Global Manufacturing PMI rising to 57 (above the forecast of 53.5) and the Services index climbing to 58.7 (above the estimate of 56), reinforcing expectations of continued Fed rate hikes [2]. Odds of a 25 basis point Fed rate hike for October increased from 52% to 66%, and for December stood at 93% [2].
In contrast, Australian economic data was less robust. S&P Global reported that September’s Manufacturing PMI contracted and the Services index slowed, pulling the Composite PMI down from 52.7 to 50.8 [2]. The upcoming Australian employment report is expected to show a 20,000 gain in jobs and an unchanged 4.5% unemployment rate [1][2]. Analysts suggest that a strong jobs report would confirm the already wide interest rate gap and keep the RBA on course for a September 29 rate hike, while a weaker report could raise doubts about further tightening [1].
Technical analysis for AUD/NZD indicates resistance at 1.2450 and support at 1.2400, with a cautious short bias below 1.2450 targeting 1.2350 and 1.2300 [1]. For AUD/USD, the pair remains bearish in the near term, trading below a cluster of simple moving averages and with momentum indicators suggesting vulnerability to further downside [2].
CONCLUSION
The Australian Dollar is under pressure against both the New Zealand and US Dollars as investors await key Australian jobs data and react to diverging central bank policies. Surging US yields and strong US economic data have bolstered the US Dollar, while expectations for an RBA rate hike hinge on the upcoming employment report. Market sentiment remains cautious, with technical indicators pointing to potential further weakness in the AUD.