AUD/USD rises to test four-week highs amid USD weakness

• AUD/USD gains 0.90% on Thursday following softer-than-expected US jobs data.
• US Dollar weakened as US Initial Jobless Claims jump to the highest since 2021
• Weak labor data softened hawkish bets on the Federal Reserve monetary policy. 

The AUD/USD jumped to its highest level since May 11 at the 0.6715 area, gaining more than 90 pips on Thursday’s session. In that sense, US Initial Jobless Claims for the week that ended on June 2 accelerated to the highest in years, softening expectations of a hawkish Federal Reserve (Fed) ahead of next week’s interest rate decision.

Labour market weakness weigh on US bond yields

The US labour market displayed signs of weakness as Initial Jobless Claims for the week ending on June 2 rose to 261K, surpassing market expectations of 235K and above the previous reading of 233K. Consequently, US bond yields experienced widespread declines, with the 2-year, 5-year, and 10-year rates exhibiting declines. This can be attributed to the revised expectations of a less aggressive Fed, resulting from the labour market's display of weakness.

According to the CME FedWatch Tool, there is a higher likelihood 77% of the Fed not raising interest rates in their upcoming meeting, maintaining the target rate at 5.00%-5.25%.

On the other hand, the Aussie continues to benefit from the unexpected 25 basis point hike by the Reserve Bank of Australia (RBA) on Tuesday. Following the decision, RBA Governor Lowe emphasized on Wednesday that while preserving the achievements in the labour market is important, it does not imply that the board will tolerate a sustained increase in inflation restating the hawkish stances of the RBA. In that sense, the expectations of ongoing rate hikes support the Aussie’s gains.

AUD/USD levels to watch

According to the daily chart, the AUD/USD holds a short-term bullish outlook as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) suggest that buyers are in control while the pair now trades above the 20-, and 200-day Simple Moving Averages (SMA) en-route towards the 100-day SMA, which stands as strong resistance at 0.6752. 

On the upside, the next resistance levels to watch are 0.6785 and 0.6800. In case of consolidating gains, immediate support levels are seen at the 200-day SMA at 0.6690 and the 20-day SMA at 0.6605.