Talking Points:
- Australia added fewer jobs overall but gained more full time positions as unemployment fell
- The Australian Dollar enjoyed the news and RBA rate hike expectations certainly increased
- AUD/USD is sitting on top of a rising trend line after breaking below a descending triangle
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The Australian Dollar appreciated against its major counterparts after October’s jobs report. This is despite the fact that Australia added fewer positions overall. In total, the country gained 3.7k titles versus 18.8k expected and 26.6k back in September. This marks the smallest gain this year so far as well as the least since September 2016.
When you look at the details of the data release, Aussie’s gain has a few arguments going for it. First, the country added 24.3k full time positions while losing 20.7k part time jobs. This can be a more favorable outcome as opposed to the direct opposite.
In addition, the unemployment rate fell to 5.4% versus expectations of it holding steady at 5.5%. This is the lowest unemployment rate since January 2013, almost 5 years ago. The labor force participation rate did decline to 65.1% instead of predictions of it staying the same at 65.2%.
Local front-end government bond yields did rally as this announcement crossed the wires. This suggests that the markets interpreted the outcome as more supportive for RBA rate hike expectations. Overnight index swaps are pricing in a better-than-even chance of such an outcome by September next year.
On a daily chart, AUD/USD continues heading lower after breaking below a descending triangle on Monday. This puts the 0.7492 completion target closer. Should the pair reverse higher, the former support line of the descending triangle might become new resistance around 0.7640.
In addition, the pair seems to be sitting right on top of a rising support trend line from December 2016 after its daily close on Wednesday. However, if you look back to July 5th and 7th of this year, Wednesday’s low matched the levels seen back then which is around 0.7573.
The intraday IG client sentiment reading for AUD/USD continues showing that traders are further net-long. With that said, a bearish contrarian trading bias still holds. This could mean that AUD/USD might continue lower.
