AUD/USD: Australian Jobs Report Disappoints, Aussie Under Pressure Again
October 19, 2023 12:24 pm
The AUD/USD currency pair is plummeting. There is no trace left of the former optimism: over the course of three days, the Aussie consistently strengthened its position amid the hawkish RBA minutes and relatively good data from China. However, today’s Australian jobs report negated all the buyers’ achievements in the AUD/USD pair. Just yesterday, the pair tested the resistance level of 0.6400 (the Kijun-sen line on the daily chart), while today, the price marked at 0.6299. It’s worth noting that despite increased volatility, the pair remains within the wide range of 0.6280–0.6430, where it has been trading for the third week in a row, alternately bouncing off its boundaries. Therefore, it’s premature to talk about a trend reversal right now; figuratively speaking, it’s a “storm in a teacup,” another price twist within a circular track.
But let’s return to today’s release. Almost all components of the report were disappointing, although the headline indicator was in the “green zone.” So, unemployment in Australia in September decreased to 3.6%, although most experts expected to see it at 3.7%, which is the August level. This is a weak consolation for the Aussie, as all other labor market indicators, to put it mildly, “underperformed.”
In particular, the number of employed individuals in the past month increased by only 6,000, while most experts predicted a more significant increase of 20,000. It’s worth noting that in August, this indicator was at 63,000. Furthermore, the structure of the September report indicates that the increase in the number of employed was due to the growth of part-time employment, while full-time employment sharply decreased. It is known that full-time positions generally offer a higher wage level and greater social security compared to part-time jobs. Therefore, the current dynamics in this regard are exclusively negative.
The share of the economically active population unexpectedly decreased as well. In August, this indicator reached its highest value in the history of observations (67.0%), and experts predicted it would remain at the same level. However, the indicator dropped to 66.7%, the minimum since April this year.
Just a couple of days ago, the minutes of the October RBA meeting were published. The document had a hawkish tone, so AUD/USD traders interpreted it in favor of the Aussie. The regulator noted that further tightening of monetary policy may be required “if inflation is more persistent than expected.” At the same time, the RBA recognized that progress in reducing inflation has slowed, and the Board of Directors has a “low tolerance for slower inflation returning to the target level.”
The hawkish tone of the minutes provided support for the Australian currency, and talks in the market about the possibility of an RBA interest rate hike in November or December resurfaced. However, weak labor market data in Australia acted as a counterbalance—this is a strong argument against additional tightening of monetary policy.
Nevertheless, the likelihood of another rate hike this year may still be on the table, even in light of today’s release. The September and quarterly data on inflation growth in Australia (scheduled for October 25) will play a crucial role in this matter.
Here, it’s necessary to quote RBA Governor Michele Bullock, who stated yesterday that if inflation remains at a higher level than expected, the Reserve Bank will respond “appropriately” by adjusting its monetary policy. She noted that at the moment, the decisions made earlier have not fully manifested themselves, but the RBA “remains very attentive to the risks of rising inflation.”
In other words, Bullock does not rule out another rate hike by the end of the current year. Evaluating her words in light of the rhetoric in the minutes of the October RBA meeting, one can conclude that weak Australian jobs report won’t necessarily hinder further monetary policy tightening if Australian inflation accelerates significantly in the third quarter.
Thus, despite the downward impetus in AUD/USD, it’s premature to speak of a trend reversal, at least as long as the pair remains within the wide price range of 0.6280–0.6430. As the pair approaches the lower boundary of this range (i.e., the lower line of the Bollinger Bands indicator on the daily chart), it makes sense for sellers to take profits and adopt a wait-and-see position. If the downward momentum weakens in this price range (i.e., if the bears don’t establish themselves below 0.6280), it’s advisable to consider long positions with targets at 0.6380 (the middle Bollinger Bands line on D1) and 0.6430 (the lower boundary of the Kumo cloud on the same timeframe).
The material has been provided by InstaForex Company – www.instaforex.com
The AUD/USD currency pair is plummeting. There is no trace left of the former optimism: over the course of three days, the Aussie consistently strengthened its position amid the hawkish RBA minutes and relatively good data from China. However, today’s Australian jobs report negated all the buyers’ achievements in the AUD/USD pair. Just yesterday, the pair tested the resistance level of 0.6400 (the Kijun-sen line on the daily chart), while today, the price marked at 0.6299. It’s worth noting that despite increased volatility, the pair remains within the wide range of 0.6280–0.6430, where it has been trading for the third week in a row, alternately bouncing off its boundaries. Therefore, it’s premature to talk about a trend reversal right now; figuratively speaking, it’s a “storm in a teacup,” another price twist within a circular track.
But let’s return to today’s release. Almost all components of the report were disappointing, although the headline indicator was in the “green zone.” So, unemployment in Australia in September decreased to 3.6%, although most experts expected to see it at 3.7%, which is the August level. This is a weak consolation for the Aussie, as all other labor market indicators, to put it mildly, “underperformed.”
In particular, the number of employed individuals in the past month increased by only 6,000, while most experts predicted a more significant increase of 20,000. It’s worth noting that in August, this indicator was at 63,000. Furthermore, the structure of the September report indicates that the increase in the number of employed was due to the growth of part-time employment, while full-time employment sharply decreased. It is known that full-time positions generally offer a higher wage level and greater social security compared to part-time jobs. Therefore, the current dynamics in this regard are exclusively negative.
The share of the economically active population unexpectedly decreased as well. In August, this indicator reached its highest value in the history of observations (67.0%), and experts predicted it would remain at the same level. However, the indicator dropped to 66.7%, the minimum since April this year.
Just a couple of days ago, the minutes of the October RBA meeting were published. The document had a hawkish tone, so AUD/USD traders interpreted it in favor of the Aussie. The regulator noted that further tightening of monetary policy may be required “if inflation is more persistent than expected.” At the same time, the RBA recognized that progress in reducing inflation has slowed, and the Board of Directors has a “low tolerance for slower inflation returning to the target level.”
The hawkish tone of the minutes provided support for the Australian currency, and talks in the market about the possibility of an RBA interest rate hike in November or December resurfaced. However, weak labor market data in Australia acted as a counterbalance—this is a strong argument against additional tightening of monetary policy.
Nevertheless, the likelihood of another rate hike this year may still be on the table, even in light of today’s release. The September and quarterly data on inflation growth in Australia (scheduled for October 25) will play a crucial role in this matter.
Here, it’s necessary to quote RBA Governor Michele Bullock, who stated yesterday that if inflation remains at a higher level than expected, the Reserve Bank will respond “appropriately” by adjusting its monetary policy. She noted that at the moment, the decisions made earlier have not fully manifested themselves, but the RBA “remains very attentive to the risks of rising inflation.”
In other words, Bullock does not rule out another rate hike by the end of the current year. Evaluating her words in light of the rhetoric in the minutes of the October RBA meeting, one can conclude that weak Australian jobs report won’t necessarily hinder further monetary policy tightening if Australian inflation accelerates significantly in the third quarter.
Thus, despite the downward impetus in AUD/USD, it’s premature to speak of a trend reversal, at least as long as the pair remains within the wide price range of 0.6280–0.6430. As the pair approaches the lower boundary of this range (i.e., the lower line of the Bollinger Bands indicator on the daily chart), it makes sense for sellers to take profits and adopt a wait-and-see position. If the downward momentum weakens in this price range (i.e., if the bears don’t establish themselves below 0.6280), it’s advisable to consider long positions with targets at 0.6380 (the middle Bollinger Bands line on D1) and 0.6430 (the lower boundary of the Kumo cloud on the same timeframe).
The material has been provided by InstaForex Company – www.instaforex.com
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