AUD/USD – Headline Employment Data mask inherent weakness

Despite a strong headline print of +10.4K to payrolls, almost doubling the forecast gain of 6.0K, AUD/USD failed to reverse the current bearish sentiment of the market. Total employment grew to 11.55 million people, maintaining unemployment rate of 5.4%, a delightful improvement after economists called for a 0.1% gain to 5.5% following Dec’s shock increase from 5.3%. The headline figure does not tell the full picture though, with full time employment actually decreasing by an additional 9.8K after last month’s -13.9K, which is a worrying sign – companies are laying off workers. The employment figure’s saving grace came from the strong part-time employment increased of 20.2K, more than double Dec’s part time payroll of +10K. Participation rate has also fell by 10 basis points to 65%, taking the shine off the better than expected unemployment rate. To put it simply – Australians are getting laid off and are finding temporarily jobs, while some of them probably gave up altogether.

Hourly Chart

Hourly Candle shows a long wick demonstrating the initial bullish reception market had from the headline figure. Price moved back due to further analysis of the figure as mentioned above, but is now being supported by the 1.03 round number. This development suggest that AUD/USD could be taking a breather from the selling from last night, which saw price falling from an Asian high close to 1.042 to a low of 1.03 during US trade. AUD/USD bulls will be glad to know that Bears are not riding on the wave of disappointing Employment Data to push the Aussie lower, something that we’ve seen yesterday from the mere effect of negative Retail Sales figures. Perhaps the bears have fully digested the dovish RBA statement on Tuesday, and that would imply that bulls can potentially look forward to some short-term reversals if proper strong economic data follows. Conversely, bears should not expect smaller economic disappointments to push AUD/USD too far down. Overnight Index Swaps is currently pricing a more than 50% probability of an RBA rate cut, which is a far way from the initial 18% before RBA’s announcement, agreeing with the observation that most of the bears have priced in a RBA decline already.

Daily Chart

From yesterday’s sell-off, price has accelerated in its bearish momentum with a break below current downward trendline. We are also looking at a 3 Black Crows bearish extension pattern with the 1st Crow’s wick being rejected by the Kumo, confirming a longer-term bearish bias.

Watch out for potential rebound back to 1.035 on any global optimism as we are currently being supported by 1.03. A push above does not necessarily mean a bullish reversal, but more of a return to the previous bearish momentum especially if 1.035 resistance manage to hold.

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AUD / USD – Under Pressure and Trying to Stay Above 1.03

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