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Australian Dollar Whipsaws After Oddly Mixed Employment Report

Australian Dollar Whipsaws After Oddly Mixed Employment Report

David Cottle, Analyst


Talking Points:

  • The Australian economy added way more jobs than expected in December
  • However, the unemployment rate rose, even as the participation rate did the same
  • AUD/USD rose, then fell in the immediate aftermath

Find out what the retail foreign exchange community makes of the Australian Dollar’s chances here at the DailyFX Sentiment Page.

The Australian Dollar wobbled Thursday on the release of official employment data which was mixed, if far from weak overall.

The Aussie economy added 34,700 jobs in December, massively ahead of the 15,000 forecast. Coming after a blockbuster set of November data this further surge might have been expected to boost the currency. But the devil appears to have been in the detail. Full-time jobs rose by ‘only’ 15,000, with part-time positions up by 19,500 (both were less than last month’s gains). These figures always have more positive impact when full-time hiring is robust, so the disparity may explain some of the Australian Dollar’s reaction.

The unemployment rate also edged up, to 5.5% from 5.4%. This was unexpected. Confusingly the overall participation rate did better, too, though. It edged up modestly to 65.7%

Given all of the above it’s perhaps unsurprising that the foreign exchange market didn’t quite know what to make of these figures. AUD/USD whipsawed in the aftermath of the release. The market seems to be accentuating the negative for the moment, however, with the pair now lower than it was before the numbers broke.

The currency remains in the solid uptrend against the US Dollar on its daily chart, which has been in place since December 10. However, it is starting to look as though some pause for breath may be in order, even if it then pushes on. Momentum indicators show the pair rather overbought now.

The Aussie has also now edged up into the area which in the recent past has prompted the Reserve Bank of Australia to worry publicly about the effects of excessive currency strength on its inflation-targeting mandate. So far it has declined to do this year, but the markets have heard very little from it at all so far anyway. Its take on the currency when they do will be of great interest.

Wednesday’s daily candle showed a relatively broad daily range but little difference between the opening and closing levels. This can be a sign of investor indecision and the next few days’ trade could be instructive.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.