AUD/USD – Stronger Employment Data No Match for Overwhleming Anti-Risk Flows

Australia’s employment number came in much stronger than expected, with headline change in employment number coming in at 1.1K versus an expected decline of -10.0k. The increase in number of Australians getting employed also drove unemployment rate by 0.1% lower, coming in at 5.5% vs an expected 5.6%. This resulted in a bullish push which sent AUD/USD above 0.95 briefly, after trading below the aforementioned level for the entirety of this morning’s Asian session. However price failed to hold on to the gains, as risk-off flows sparked by Nikkei 225’s major slide pushed risk currencies lower across board.

Hourly Chart

From a technical perspective, this is a bearish movement as price has failed to break up above the rising trendline that typifies the recovery rally from 0.933. The break below the rising trendline, and the rejection by the descending trendline which typifies the decline from 7th Jun puts bears in a driving seat for a move back below 0.943 towards 0.933. However, the journey may not be as smooth with bumps to be expected along the way as Stochastic readings shows that price is already dipping into the Oversold region, which may make it hard for bears to launch a direct attack and extend current bear trend.

Weekly Chart

Weekly Chart is bearish with 5 consecutive weekly losses with the 6th (current candle) on the way. Current price is continuing the decline from 0.97, but 0.94 (0.938 to be precise) remain firm, which may jeopardize current sell-off and allow price to rebound back towards 0.97. A full bearish scenario would have current candle closing below the 0.938 level and preferably below 0.93, but that will require short-term momentum to gain pace which may be hard as discussed earlier.

Fundamentally, Australia’s economy outlook is weak due to a myriad of reasons, but the combination of China slowing, global slowdown, and Australia’s inherent structural issues suggest that the problem is complex and hard to reverse. Nonetheless, it is possible that individual economic data may be sporadically better than expected e.g. today’s employment data. However better than expected does not necessarily mean that the economy is better/recovering. Case in point, the 1.1K increment of employment headline figure is broken down to a 6.4K increase in Part Time employment and a -5.3K in Full Time employment, hardly a cause for joy. This would mean that AUD/USD may receive short-term bullish impetus moving forward as we have seen earlier, but with weak fundamentals and strong dovishness of RBA coupled with bearish sentiment of the market, there is a higher likelihood that bears will sell into rallies moving forward.

More Links:
AUD/USD – Meets Stiff Resistance Around 0.95
GBP/USD – Moves Higher to Resistance Level at 1.57
NZD/USD – RBNZ Holds Rate, Multi-Year trendline back in focus

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