Jump to content

Market update: Australian dollar drops on mixed jobs data, ahead of CPI

Recommended Posts

The Australian dollar crumbled after today’s jobs numbers; the RBA meeting has taken on a new light with inflation in its sights; and the market is eyeing next week’s CPI. Will it drive AUD/USD direction?


original-size.webpSource: Bloomberg


Daniel McCarthy | Strategist, | Publication date: Thursday 19 October 2023 05:13

The Australian dollar weakened today after a mixed reading from the latest employment report from the Australian Bureau of Statistics (ABS). It had already appeared vulnerable going into the figures.

The unemployment rate came in at 3.6% in September below the 3.7% anticipated and prior. 6.7k Australian jobs were added in the month, which was less than the 20k expected to be added and 64.9k previously. Unfortunately, 39.9k full time jobs were lost while 46.5k part time roles were added; and the participation rate fell from 67.0% to 66.7%, assisting the headline unemployment rate to inch lower.

The RBA left rates unchanged earlier this month at 4.10% but there have been some notable developments since then. It started with Reserve Bank of Australia (RBA) assistant Governor Chris Kent on Wednesday last week.

While he highlighted the problems around the time lags in the transmission effect of monetary policy, he went on to say, “Some further tightening may be required to ensure that inflation, that is still too high, returns to target.”

The RBA seems hawkish

Then earlier this week, the RBA meeting minutes were released, and they showed that the board was far closer to hiking than the statement on monetary policy said at the time.

Specifically, the minutes stated, “The Board has a low tolerance for a slower return of inflation to target than currently expected. Whether or not a further increase in interest rates is required would, therefore, depend on the incoming data and how these alter the economic outlook and the evolving assessment of risks.”

Compounding the hawkish tilt, RBA Governor Michele Bullock spoke at a summit yesterday and pointed to the problems of external events triggering inflation when they arrive one after the other.

She said, “the problem is we’ve had shock after shock after shock. The more that keeps inflation elevated, even if it’s from supply shocks, the more people adjust their thinking.”Before adding, “And the more people adjust their inflation expectations, the more entrenched inflation is likely to become. So that’s the challenge.”

All eyes on CPI data

All of this brings next Wednesday’s Australian CPI data for the third quarter into sharp focus for the aussie dollar. A Bloomberg survey of economists is anticipating headline inflation to be 5.2% year-on-year against 6.0% previously, well above the RBA’s mandated target of 2 – 3%.

A wide variation from expectations could trigger a bout of volatility for AUD/USD. In the near term, Treasury yields have been climbing higher, underpinning the US dollar and this may see AUD/USD test lower levels if yields continue higher.

AUD/USD price reaction to jobs data


original-size.webpSource: TradingView

AUD/USD technical analysis

AUD/USD bounced off the low of 0.6286 to start the week, and if the price fails to move below that level, a Double Bottom might be in place.

Overall, it remains in a descending trend channel and bearish momentum might be intact for now. A bearish triple moving average (TMA) formation requires the price to be below the short-term Simple Moving Average (SMA), the latter to be below the medium-term SMA and the medium-term SMA to be below the long-term SMA. All SMAs also need to have a negative gradient.

When looking at any combination of the 21-, 34-, 55- 100- and 200-day SMAs, the criteria for a bearish TMA have been met and might suggest that bearish momentum is evolving.

Last Wednesday’s high of 0.6445 coincided with the 55-day Simple Moving Average (SMA) and that level may offer resistance ahead of a cluster of prior peaks in the 0.6500 – 0.6510 area. Further up, the 0.6600 - 0.6620 area might be another resistance zone with several breakpoints and previous highs there.

On the downside, support may lie near the previous lows of 0.6286, 0.6272 and 0.6170. The latter might also be supported at 161.8% Fibonacci Extension level at 0.6186.

AUD/USD daily chart


original-size.webpSource: TradingView




This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • MON Protocol aims to be a leading developer and publisher of blockchain-native IPs and games. Their vision extends beyond traditional gaming ecosystems, as they seek to bring games and gaming characters onto the blockchain. MON is an ERC-20 fungible token that powers and governs fractionalized IP ecosystems.   30% of the total supply is allocated for community claims, emphasizing community-driven initiatives. While 29% of the total token supply is dedicated to fostering growth and sustainability within both the Pixelmon and MON Protocol communities. All one billion tokens will be fully unlocked within 48 months of the token generation event (TGE), which is anticipated to take place in Q1 2024. This gradual release underscores MON Protocol's commitment to transparency and ecosystem development. Will MON Protocol's unique approach to IP governance, combined with Bitget's strategic listing, positions it as a frontrunner in fostering community engagement and sustainable ecosystem growth?
    • Another reason I prefer DAX to other markets is that I am able to use my own profitable method on it, which I call "Reverse Trades." In it's simplest form it is a good Entry Point, which is used repeatedly for trades, for as many times as the market price returns to this Entry Point.  This is illustrated in the chart below for 22nd May. The best Reverse Trades occur when the market beats the Entry Price and then re-crosses the Entry Price. If this is not clear, feel free to write to me and I will explain in greater detail.
    • The gaming industry is one of the industries that has effectively leveraged the efficiency of blockchain technology to drive growth. A fiercely competitive sector, it takes unique innovative Ideas to stand out. When analysing the chances of infant GameFi projects to reach the heights, one project seems to have staked a claim to be soon held in the same breath as the leading projects– Param Labs. Param Labs, an AAA game and blockchain development studio is dedicated to creating top-tier blockchain-integrated games with player-owned digital assets, and is developing a modular gaming ecosystem, comprised of games and infrastructure.  Already a trending project thanks to the widespread participation of its airdrop, Param has gone on to strike partnership with Animoca Brands, a frontrunner for advancing digital property rights within gaming and the open metaverse; highlighting its wildfire-esque spread. While the buzzing community anticipate their airdrop reward, the news that it will launch on Bitget on 29th May amongst other exciting listings has spiked the anticipation. If you can relate, how excited are you with the imminent launch and what Param Labs brings to the gaming industry generally?
  • Create New...