AUD/USD – Rally on Higher Employment

Australia Employment figure came in much stronger than expected, coming in at 50.1K vs 11.0K expected, and a welcomed reversal from previous month’s -31.1K shrinkage. Unemployment rate has been pushed down 0.1% lower from the previous and expected 5.6% in the midst of increasing participation rate. Looking deeper, the numbers are also healthy with the bulk of job increase coming from Full Time category, which gained 34.5K while Part Time increased by 15.6K.

Hourly Chart

AUD/USD rallied on the news, breaking a few significant technical barriers along the way. Price manage to clear 1.02 round number, the 23.6% Fib retracement from the slide from 1.0385, 1.022 significant resistance, and the descending Kumo. Currently price is in the midst of breaking 1.024 support turned resistance which is the confluence with 38.2% Fib, and approaching 1.025 resistance once more. That sums up to 4 levels of resistances vanquished with 2 more remaining, and one may easily think that price is highly bullish right now.

However, it is important to note that the absolute gain is only around 70 pips, which is not really significant considering the 4 times better than anticipated numbers. It is clear that overall trend remains bearish, as evident by how price has been rejected by 1.025 in its first attempt, suggesting that the ghost of Tuesday’s RBA rate cut is not yet banished.

Bulls can take heart though, as Stoch readings are still pointing higher, and was actually signalling a bull cycle way before the employment news was announced. Furthermore, the bullish pullback during early Asian session was finding some support via the Senkou Span A after current Kumo was breached. This shows that bulls were still robust despite the RBA rate cut on Tuesday and that may allow AUD/USD to remain broadly supported despite the overall bearish pressure that is not yet dispelled.

Daily Chart

Daily Chart shows price continuing the bearish Kumo breakout. Yesterday we’ve mentioned the possibility of price retracing back despite the Three Black Crows formation. With Today’s strong rally, a tweezer bottom scenario cannot be ignored, which may also invalidate the 3 Black Crows formation if we close above the last crow’s high. This may not necessary invalidate the bearish breakout from current Kumo, but certainly it suggest that a pullback above 1.025 or even higher may be possible.

Fundamentally, we need to ask if the employment numbers is a good leading indicator for Australia’s future economy. First off, the numbers may not even reflect true employment situation (or at least the way we know it) as the sampling method for this round of survey has changed. Even if the numbers can be considered as a true reflection, the threat of Chinese slowing growth still weigh heavily, with Australia’s own mining industry peaking. The most telling sign about the is the fact that RBA has chosen to slash rates even though RBA themselves were relatively hawkish and upbeat about the economy. With that in mind, it is hard to imagine a true bottoming of AUD/USD here where price may be able to reach 1.06 or potentially beyond from here.

More Links:
NZD/USD – More Jobs in New Zealand as Unemployment Rate falls to 2009 low
AUD/USD – Struggling to Stay Within Touch of 1.02
GBP/USD – Makes Another Run at 1.56

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