Australian Dollar, AUD/USD, Jobs Report, RBA, Oil, Iron Ore - Talking Points
- Australia added 12.9k jobs in January as labor market participation rose
- Oil prices fell overnight for a second day as Iran signals progress on talks
- AUD/USD is testing trendline resistance after break above the 50-day SMA
Australian Jobs Report
Australia added 12.9k jobs in January, beating the +0k Bloomberg consensus forecast. The jobless rate held steady at the decade-low 4.2%, in line with expectations, while the participation rate increased to 66.2% from 66.1%. The better-than-expected report suggests that the Covid Omicron variant’s drag on the labor market was marginal at best. Although there was a drawdown in hours worked, an expected impact from the new strain. AUD/USD trimmed gains initially but remained higher. Investors await wage inflation data due out next week.
The market expectation for an RBA rate hikes this year have grown considerably over the last couple of months. Cash rate futures were pricing in over 100 basis points (bps) of tightening by December, although RBA Governor Philip Lowe remains relatively dovish in his language. The RBA chief signaled earlier this month that the central bank would endure inflation above the 2-3% target range. Currently, core inflation is running at 2.6%, which leaves some room for prices to run higher before meeting that proposition.
Thursday’s Asia-Pacific Outlook
Asia-Pacific markets look set to move higher today following a mixed session on Wall Street overnight. The benchmark S&P 500 index closed 0.9% higher after the Federal Reserve’s latest meeting minutes crossed the wires. Those minutes showed that most members agreed over a more aggressive response in tightening policy should high inflation persist. Investors were largely unfazed, given that several board members echoed similar sentiments recently. The latest CPI report, released after the January FOMC meeting, showed a 7.5% y/y rise in prices – the highest in 40 years.
Oil prices fell again as the chances for Iranian oil returning to the market improved amid ongoing negotiations in Vienna. Iran has the capacity to produce around 2 to 4 million barrels per day, according to energy analysts. Bloomberg reported, citing people with knowledge of the talks, that officials from National Iranian Oil Co. – a state-owned firm – are in preliminary talks with two South Korean refiners. Iran’s top negotiator Ali Bagheri Kani tweeted that a deal is closer than ever this morning, adding to the bearish move in prices.
Iron ore is on the move lower, resuming its decline from a multi-month high set earlier this month. Chinese steelmakers are under regulatory watch as Beijing resumes its battle against speculation in the industry. China is embracing pro-growth monetary and fiscal policies, which leaves the iron-hungry country with a difficult task in keeping prices stable. The drop in iron ore prices is likely weighing on the Australian Dollar. Chinese vehicle sales for January will cross the wires later today.
The Philippine central bank is expected to keep its benchmark rate steady at 2% in today’s policy decision. Meanwhile, traders will keep an eye on tensions along the Ukrainian border. Russia claimed early this week that it was pulling some troops away from the border in an apparent show of good faith. The United States rebuffed those claims early this morning, saying that the troop presence has increased by around 7k bringing the total force strength, per intelligence estimates, over 150k.
AUD/USD Technical Forecast
AUD/USD rose above the 50-day Simple Moving Average (SMA) and the 61.8% Fibonacci retracement overnight. A descending trendline now stands in the way of bulls targeting the 100-day SMA. MACD offered a bullish signal crossing above its center line. A break above the trendline may invite further gains. A reversal lower would bring the 50-day SMA back into focus for possible support.
AUD/USD Daily Chart
Chart created with TradingView
| Change in | Longs | Shorts | OI |
| Daily | 0% | -18% | -4% |
| Weekly | 19% | -32% | 5% |
--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
